Football Stocks: Variables To Look At

Due to your recent interest in how to analyze better football stocks, I summarized some variables that affect their market prices. In any case, be aware the price performance for these football teams is barely correlated with traditional indexes (even equity ones) according to their historical data. They are not as exposed to events or news of an economic nature so that they offer an attractive investment opportunity to diversify your portfolio.

As I pointed out in the previous post, they may be a good investment opportunity for the current season from a broad perspective about the industry rather than some football stock in particular. However, according to statistical data about the past STOXX Europe Football Index performance, the best opportunities for these stocks come from the emotional nature of these investments. Therefore, they fit better with short-term investment horizons rather than medium and long-term. Here are some short-term variables I look at when I invest in this kind of business:

1. Wining important tournaments: especially in the case of home leagues and Champions League titles. In case the team was not expected to win that trophy during that season, the market might overreact to this kind of event.
2. Champions League final rounds: especially if your team is not between the biggest European football clubs and wins some rounds against general expectations. Regarding the biggest ones such as Manchester United or Juventus, these final round matches are considered the most important in the world of football and attract a lot of audience.
3. Recent match results: especially in winning or losing streaks after several matches and also important matches such as derbies, classic matches between the best teams competing in the same league, or any other match that may attract a great audience and expectations.
4. Other special events that may change team performance future expectations: long important injuries and sanctions, speculations about the future of the football manager and who might replace him, or key new signings during the transfer windows.
5. News about TV rights, due to they are an important source of revenue for football teams.
6. The club´s management team: they are determinants for the club´s economic present and future and it is a key aspect to consider when performing your fundamentals analysis and investment decision. For example, though FC Barcelona is not trading in public markets, its management team did not perform well since 2015 in regard to football players' contracts and salaries, new signings that were not successful either, and the financial position became highly leveraged after several years. Consequently, the new management in charge has had to sell the most valuable players they had because the club could not even pay the high salaries signed by the previous management team.
7. Football player operations: for example, there are some football clubs such as Borussia Dortmund, Ajax, Benfica, and FC Porto with good track records on developing football players and getting uncommon profits by selling them at a much higher market price.
8. Other parameters related to football.
9. Other parameters related to sports in general to a lesser extent.

Besides the short-term investment horizons already exposed, it is worth mentioning they are quite volatile because of these events (you may find differences higher than 10% of the market prices within the same trading date) and the average volume of shares traded is higher during summer months due to is when competitions finish and most of the new signings are made.

I hope this post has given you a better idea about how these football team stocks react to events in the short term. In case you want to know more about this kind of business, do not hesitate to contact me as you did the last time and I will try to help you as much as possible.