by Will Ashworth | July 6, 2012 7:30 am
With the July 4th holiday in the rear window and summer officially underway, I thought it would be fun to put together a global sports portfolio consisting of 16 sports-related stocks. Soccer fans will be disappointed because soon-to-IPO Manchester United won’t be among them — it’s a dud offering if I ever saw one. Nonetheless, there are some interesting possibilities to choose from.
To make things more difficult, we’ll add a rule: 50% of the portfolio must be from outside the U.S.
Let the games begin.
Selecting just eight sports-related companies isn’t an easy task. However, most investors would put Nike (NYSE:NKE) at the top of their list. Although its stock’s taken a beating since it announced disappointing fourth quarter earnings June 29, it’s still the world’s greatest sports business.
Of course, no conversation about Nike takes place without mentioning Under Armour (NYSE:UA), its smaller but fierce rival. I like both companies and am glad I can include each of them in my would-be global sports portfolio. If I could only pick one, though, it would have to be Nike simply because of the difference in valuation.
Next up is what I like to call the “Big Three” of sports media in this country. Madison Square Garden (NASDAQ:MSG) recently acquired the Los Angeles Forum. As the owner of sports teams, sports and music networks and iconic venues like the Garden, Radio City Music Hall and now the Forum, it’s is a force to be reckoned with. Backing up MSG is CBS (NYSE:CBS) and Walt Disney (NYSE:DIS), both knee-deep in sports TV. It’s a media trifecta.
With three picks left for the domestic holdings, I’m going to spread them out a little bit. In many circles, target shooting is a big-time sport and very few companies have the reputation of Sturm, Ruger & Co. (NYSE:RGR) — not to mention its stock’s been hotter than a pistol the past five years, up 21.6% annually.
My second to last pick is Polaris Industries (NYSE:PII), makers of ATVs, snowmobiles and motorcycles. Because I’m trying to fill the portfolio with as many big companies as possible, I’ll go with Polaris, although Arctic Cat (NASDAQ:ACAT) is equally as attractive. Like Nike and Under Armour, they’re interchangeable.
Lastly, you couldn’t talk about sports without mentioning Dick’s Sporting Goods (NYSE:DKS), the largest sporting goods retailer in America. Dick’s consistent growth in revenues and profits make it one of the most stable retail stocks to own anywhere.
The most logical place to start is with Adidas (PINK:ADDYY), owner of some of the best brands in sport including Adams Golf, which it recently acquired for $70 million. A few years ago it did another niche acquisition, purchasing my namesake Ashworth Inc. for about the same amount of money. It has slowly built a very impressive golf business.
Next up is a company most Americans won’t know from Adam. Finland’s Amer Sports (PINK:AGPDY) owns the Salomon, Wilson, Precor and Arc’teryx brands and, despite suffering some financial woes the last few years, has a solid future.
Off to Asia and the Pacific for the next three picks. The first is Shimano (PINK:SHMDF), the Japanese company known for bike components (80% of its business) and fishing equipment (20%). It’s also expanding into rowing equipment. Profitability and sales growth aren’t a concern– each increased by more than 20% in the quarter ended March 31.
Over to China. I’m going with Anta Sports Products, which trades over-the-counter as an unsponsored ADR. However, because the volume is nonexistent over here, it makes better sense to buy the EGShares Low Volatility Emerging Markets Dividend ETF (NYSE:HILO), which has the sportswear manufacturer in the top 10 holdings at a weighting of around 4%.
Lastly, and even though its business is hurting, I’ll go with Australian surf brand Billabong (PINK:BLLAY), whose shares are under intense scrutiny due to persistent takeover chatter. Its CEO is on record as saying he won’t take less than AUD$4 a share, which equates to about $8 per ADR. Someone will buy it.
Finishing up in the Western hemisphere, I have three final picks, and they’re all north of the border in Canada. The first should come as no surprise, and that’s Lululemon (NASDAQ:LULU), the Vancouver-based retailer that’s taking America by storm. Originally into yoga wear, it has successfully expanded into athletic attire, and that’s what will keep it at the top.
Next up is iconic Canadian Tire (PINK:CDNAF), a brand every Canadian knows. It was already big in sporting goods and last August acquired Calgary-based Forzani Group, Canada’s No. 1 sporting goods retailer for $771 million. The move solidified its position across the country and made it much harder for someone like Dick’s to enter the market. A brilliant move.
Lastly, Dorel Industries (PINK:DIIBF) manufactures bicycles under the Cannondale, Schwinn, GT, Pacific and Mongoose brands. In addition, it also markets ready-to-assemble furniture and juvenile products. Not a tiny company, its revenues in 2011 were $2.4 billion.
So there you have it — a global sports portfolio. Now it’s your turn to call the play.
As of this writing, Will Ashworth did not own a position in any of the stocks named here.
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