Wyc Grousbeck, a co-owner of the Boston Celtics, is looking to raise $175 million for sports-related technology investments. In January, Causeway Media Partners filed regulatory documents for its second sport-related venture capital fund.
In its first fund, Causeway raised $125 million from investors that included Three Arch Partners founder Mark Wan (who owns a piece of the Celtics) and Highland Capital Partners co-founder Bob Higgins.
Investments in the first fund include Street League Skateboarding, a professional skateboarding league founded in 2010; Formula E, the electric version of Formula 1 racing; and TuneIn, a streaming radio service for sports and news that gives subscribers access to more than 100,000 radio stations around the world.
One of its original investments, Sport Ngin, which provides mobile apps for groups to manage youth sports leagues, was sold in 2016 to NBC Sports.
While it would be great to invest in venture capital deals like the ones Grousbeck gets involved with, most don’t get that opportunity.
However, these seven sports investments all use technology to one degree or another and they all will make you money over the long haul.
Sports Stocks to Buy: Lululemon Athletica Inc. (LULU)
The founder of Lululemon Athletica Inc. (NASDAQ:LULU) bought a bus shelter ad that’s outside of its company headquarters that suggests it ought to buy Under Armour Inc (NYSE:UA, NYSE:UAA) whose fast-growing ways seem to have come to a dramatic end.
InvestorPlace contributor Aaron Levitt recently discussed how Under Armour’s quarterly revenue growth of 22% simply won’t cut it when UAA stock is priced to perfection at 41 times earnings.
He’s absolutely right.
It also won’t gain the affection of investors when its CEO is alienating its roster of sponsored athletes. Democrat or Republican, sneaker companies sponsor athletes like Steph Curry to sell shoes.
As for Lululemon, I suggested a year ago in March that VF Corp (NYSE:VFC) would make a good buyer for LULU because both Under Armour and Nike were too busy building their own brands while VF is a serial acquirer of businesses and would make a good home for the champion of athleisure.
Boy, have times changed.
LULU now has a larger market cap than Under Armour and it is in a much better financial position — Under Armour has $817 million in net debt compared to $480 million in net cash for Lululemon — suggesting, as Wilson’s ad states, that Lululemon has become the stalker rather than the prey.
Either way, I think investors win owning LULU stock over the long haul.
Sports Stocks to Buy: Vail Resorts, Inc. (MTN)
If you asked 100 investors what the best-performing stock was over the last decade, I can guarantee that all of them would say anything but Vail Resorts, Inc. (NYSE:MTN), the operator of ski resorts in the U.S., Canada and Australia, including the Colorado resort that bears its name.
It’s currently trading within 1% of its five-year and all-time high of $179.04. MTN stock is up 10.0% year-to-date through Feb. 15; it hasn’t had a negative year since 2011 and it has had only two down years over the last decade.
To say it’s on a roll is an understatement.
If you had invested $10,000 in Vail Resorts five years ago, today you would have $43,382 compared to $19,204 if you’d invested in Nike instead.
The company’s 2016 purchase of Whistler Blackcomb for $1.1 billion only cemented its position as North America’s biggest and best operator of ski resorts; the best part of the acquisition as far as skiers are concerned is that Whistler and Blackcomb get added to Vail Resorts’ $809 Epic Pass come the 2017/2018 ski season, meaning skiing at Whistler will be a whole lot cheaper for Americans holding the pass.
Bottom line: This is a much more stable investment than most people realize.
Sports Stocks to Buy: Walt Disney Co (DIS)
Investors are right to be concerned about ESPN’s declining revenues and profits. In 2017’s first quarter, Walt Disney Co (NYSE:DIS) saw revenue and operating profits at its cable network segment, of which ESPN is a major part, decline by 2% and 11% respectively.
However, there are two reasons why this isn’t a big deal for DIS stock.
The first one you have to take at face value; CEO Bob Iger said the drop was due to three fewer bowl games in the quarter than a year earlier. The second is the fact Disney plans to launch its own direct-to-consumer sports service by the end of this year and that should stem some of the lost revenue from cord cutters.
But look beyond ESPN and Disney is a thing of beauty.
Since Disney bought Pixar a decade ago, the 30 films its movie division has produced have averaged $800 million in global box office. On a cumulative basis that’s $24 billion or $2.4 billion annually. It’s hard to go broke when you’re generating that kind of coin from just one part of your business.
Bob Iger is going to keep allocating capital in an efficient manner; I’m sure the board will hire someone when he retires who’ll do the same. This is a great buy-and-hold stock.
Sports Stocks to Buy: Nike Inc (NKE)
In the last year, the S&P 500 generated a total return of 25.8% through Feb. 15. By comparison, Nike Inc (NYSE:NKE) has gained only 0.2% for NKE shareholders while its upstart competitor, Under Armour, has been decimated losing 45% of its value over the same period.
Last November, I suggested that Nike would be a great candidate for Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) to acquire because CEO Mark Parker has been in the top job for the last decade making the transition an easy one.
It probably won’t happen, but if Buffett wants an easy-to-understand company, Nike’s at the top of the list.
With NKE’s North American business rebounding, China continuing to grow and its direct-to-consumer business becoming a bigger part of its overall revenue, margins have once more become a become a positive for the company and that’s good news for shareholders.
Nike management is confident about its business and they should be.
Sports Stocks to Buy: Brunswick Corporation (BC)
Anyone who has followed the trials and tribulations of Brunswick Corporation (NYSE:BC) since the 2008 financial crisis knows how much effort the company has put into reviving its boat business, a process that’s still ongoing.
Today, Brunswick has 15 boat brands, including Bayliner and Sea Ray and generates $1.3 billion in revenue (fiscal 2015); back in 2008 it had 24 brands and generated $2.0 billion in revenue. Unfortunately, the boat segment in 2008 also had operating losses of $653.7 million compared to 2015 operating profits of $37.6 million.
Once the noose around Brunswick’s neck, the boat segment can now pay its own way which is great news because, in Q3 2016, the marine engine and fitness segments both delivered profitable growth, suggesting any further improvement in the boat segment will drop to the bottom line.
I expect Brunswick to continue to make accretive acquisitions in the months and years ahead, especially in the fitness segment, where it will soon be a billion-dollar business.
Sports Stocks to Buy: Columbia Sportswear Company (COLM)
Columbia Sportswear Company (NASDAQ:COLM) released earnings February 10 that beat analyst expectations sending its stock higher by more than 12% and within 10% of its 52-week high of $63.55.
COLM is one of those sports stocks that’s performed better over the long haul than most people would guess—5-year annualized total return of 19.8%, 587 basis points higher than the S&P 500.
A big contributor to its growth in fiscal 2016 was its direct-to-consumer business with its own retail stores and e-commerce business increasing more than 10% to $879.5 million or 37% of its $2.4 billion in annual revenue.
With almost $8 in cash, just $14 million in debt and a decent 1.2% dividend yield, I expect Columbia Sportswear to continue to plod along growing earnings at 4% a year.
It isn’t sexy but it works.
Sports Stocks to Buy: Polaris Industries Inc. (PII)
When it comes to powersports, there aren’t many firms that can match the firepower of Polaris Industries Inc. (NYSE:PII) who’ve got competitive products in the snowmobile, ATV and motorcycle markets.
Unfortunately, what once was a stock market darling has taken it on the chin the last 24 months and that has made PII stock a lot more attractive from a valuation perspective despite recall troubles that plagued the company in 2016.
The fact remains that in 2016, Polaris still generated adjusted net earnings of $3.48 per share despite a 50% year-over-year decline, on revenue of $4.5 billion.
In 2017, it expects adjusted earnings per share of at least $4.25, which gives it a 2017 P/E ratio of 20.4 or about equal to its average for the last five years.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.