Advertisement
UK markets closed

  • FTSE 100

    8,139.83
    +60.97 (+0.75%)
     

  • FTSE 250

    19,824.16
    +222.18 (+1.13%)
     

  • AIM

    755.28
    +2.16 (+0.29%)
     

  • GBP/EUR

    1.1680
    +0.0023 (+0.20%)
     

  • GBP/USD

    1.2498
    -0.0013 (-0.10%)
     

  • Bitcoin GBP

    51,113.28
    -615.83 (-1.19%)
     

  • CMC Crypto 200

    1,329.13
    -67.40 (-4.82%)
     

  • S&P 500

    5,099.81
    +51.39 (+1.02%)
     

  • DOW

    38,239.13
    +153.33 (+0.40%)
     

  • CRUDE OIL

    83.65
    +0.08 (+0.10%)
     

  • GOLD FUTURES

    2,350.60
    +8.10 (+0.35%)
     

  • NIKKEI 225

    37,934.76
    +306.28 (+0.81%)
     

  • HANG SENG

    17,651.15
    +366.61 (+2.12%)
     

  • DAX

    18,161.01
    +243.73 (+1.36%)
     

  • CAC 40

    8,088.24
    +71.59 (+0.89%)
     
PROPERTY:

9 luxury homes to consider if money is no object

Ever thought about what a multimillion pound budget would buy you?

Manchester United: England's Most Valuable Football Club

GuruFocus.com

- By Jonathan Poland

Not sure if legendary investor Ron Baron is a fan of the sport or supporter of the club, but his 37% stake (via Bamco) is at least one reason to think about this stock, even if you're not a fan of European football. Throw in small positions from Renaissance Technologies and DE Shaw, and it'll be worth reading more.

Last summer, CNBC ran an article on the most valuable sports franchises, putting Dallas at the top of the list. Manchester United (MANU) was fifth behind the New York Yankees and the two Spanish football powerhouses - FC Barcelona and Real Madrid - making it the largest publicly traded sports team in any market.

ADVERTISEMENT


Since 2009, revenue at the club has risen from $278 million to more than $512 million year to date. While its league position is not up to the standards the renowned club is accustomed to, the future will likely see both more English Premier League (EPL) titles and Champions League appearances and a much more valuable organization.

Analyzing a sports brand is not like analyzing other businesses as each league has a finite number of companies and naturally sets barriers to entry.

From a sports standpoint, Manchester United is a powerhouse experiencing a changing of the guard in its history. It hired a rival's former coach, Jose Mourinho, as the new manager, who has won 23 trophies in the last 13 years. He's brought in two of the world's best and most popular players in Paul Pogba and Zlatan Ibrahimovich to accompany the massively talented young star power in Anthony Martial and Marcus Rashford.

In its last quarter, Manchester United reported record revenues on a 27% increase while management raised 2017 guidance to 530 million to 540 million pounds ($653.47 million to $665.8 million). Commercial revenue was up 41%, broadcasting revenue rose 17%, and match day revenue increased 13% despite an early exit from Europe's biggest tournament, the Champions League.

Sales growth isn't going to be the problem. The club's Old Trafford (dubbed Theatre of Dreams) is one of the world's most pre-eminent sports venues. It seats 75,766 and has averaged over 99% attendance capacity for its Premier League matches for the last 15 years. Manchester United will continue to sell more tickets and products at higher prices, driving revenue growth at 9% to 10% annually for the next three to five years. The challenge is turning sales growth into profit and more importantly book value growth.

Currency fluctuations will impact results, but at this point both the pound after the Brexit and the Red Devils' fifth-place spot in the Premier League could actually be good reasons to buy in, but only if you plan on holding for the long term.

The pound-dollar rate is at 1.23, the lowest in more than a decade. That's good for tourism to Old Trafford and even good for Manchester United's followers outside of the home country. The club touts over 650 million followers around the world, and that brand is only getting bigger. Football (the sport played with a ball at your feet) is still the most popular game on the planet - by a significant margin.

I've been a major supporter of the Red Devils since I was a kid and Ryan Giggs was first brought up to the pro team in 1990, but I'm also a value investor. Gary Vaynerchuk wants to own the New York Jets, and I want to own Manchester United, just not at this price. In 10 years, the market value could easily be 100% higher, yet I think that the Standard & Poor's 500 will be 125% to 150% more valuable, and there are and will be a number of plain-sight opportunities throughout this year to generate more than 200% in the next decade. For now, if you want to follow Barron and Simons into Manchester United, use the weightings within these brilliant gurus' portfolios and keep the Manchester United holding to less than 1%.

Disclosure: I do not hold a position in the stock mentioned in this article.

Start a free seven-day trial of Premium Membership to GuruFocus.

This article first appeared on GuruFocus.