Index Fund for the Sports Fan

SportsETFs

SportsETFs launched a Pro Sports Sponsors Index (FANZ) during the ’17 MLB all-star break, consisting of 66 companies that are official sponsors of the 4 major sports leagues; today that figure is up to 67. Nick Fullerton is the man behind index fund and JohnWallStreet had the chance to connect with him late last week to discuss what it is about pro sports sponsors that makes them attractive from an investment standpoint. 

JWS: Who is investing in this fund?

Nick: We designed this index to provide a general investor, a sports fan and a financial advisor with a product they can intuitively get. This gives them a vehicle to invest in something that they know.

JWS: Can you discuss the methodology behind selecting names for the index?

Nick: It’s rules based product, so we’re not doing any stock selection on our end. You must be an official partner of one of these core four sports leagues. The leagues are essentially doing the vetting and stock picking for us when they enter one of these multi-year agreements. You must be publicly traded on one of the major U.S. or Canadian stock exchanges and the index is equally weighted.

JWS: What is it about corporate sponsors of pro sports leagues that makes them an attractive investment option?

Nick: If you look at the companies that partner with the league, they are typically blue-chip companies that still want to grow (think: DIS, AMZN, BRK.A); so, they’ve got a growth component but, they’ve also got a value component in that they have enough free cash flow to earmark a big chunk of their marketing budget to sports. They’re typically strong cash flow, well-known brands. These are companies that want to market and sell to a loyal, dedicated and passionate community of customers – there is no other group or medium that brings so many people together for these brands.

Howie Long-Short: How was the fund performed?

Nick: The index has been similar to or beating the S&P 500 since our July 11, 2017 launch date. We back-tested the index to 2005 and it beat the S&P 500 by over 130%.

Note: The fund trades under the symbol FANZ on the BATS exchange.

Fan Marino: Investing > Gambling. On Saturday evening, Michigan played Florida State with a spot in the Final 4 on the line. Down 4 and with 10 seconds remaining, Florida State chose not to foul allowing the clock to expire. Coach Leonard Hamilton said after the game that the reason he chose not to foul was because “the game was over”. Despite Hamilton’s belief, it wasn’t over for Florida State (even with 2 FTs, it’s only a 2-possession game) and it certainly wasn’t over for gamblers who had Michigan -4.5. Tough loss.

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WSJ: Just 7 Ways to Publicly Invest in Sports, JWS: Not the Case

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The WSJ published a recent story asserting there are few ways to directly invest in sports, a notion we dispute. The article deemed just 7 publicly traded equities to be sports-related and based their conclusion, that fans are better off watching and playing sports than investing in them, on the performance of 2 exchange traded funds; one of which (FANZ) has beat the S&P since its July ’17 inception, which would seem to counter to their argument. The article cites Matt Hougan, the CEO of Inside ETFs, and his belief that most of the economic value within sports (ownership and player contracts) “comes in private transactions”, to support the author’s thesis; but fails to pay consideration to the revenue streams that support those contracts (and generate ownership profits). It’s worth noting that JohnWallStreet follows over 100 sports-related equities.

Howie Long-Short: Sports teams generate revenue from 4 sources; broadcast rights, ticket sales, sponsorships and merchandising. Several publicly traded equities use a similar business model; Churchill Downs (CHDN), International Speedway (ISCA), Dover Motorsports (DVD) and Speedway Motorsports (TRK), and thus should also be included on the list. Others, like Acushnet Holdings Corp. (GOLF) and Callaway Golf Company (ELY), are undeniably directly tied to sports; and no one would claim your basket was unfocused if companies like Nike (NKE), Lululemon (LULU) and Fitbit (FIT) were to be included. Oh, and don’t forget Activision Blizzard’s (ATVI) new esports league (Overwatch); their inaugural season starts today.

Fan Marino: The story names the New York Knicks, New York Rangers (MSG), Atlanta Braves (BATRK), Manchester United (MANU) and Borussia Dortmund (BORUF) as the teams you can purchase equity in. The Toronto Blue Jays, Toronto Maple Leafs (RCI), Juventus F.C. (JVTSF), A.S. Roma (ASRAF) and SS Lazio (BIT: SSL) are also all publicly traded.

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SPORTS ETFS LAUNCHES INDEX FUND FOR SPORTS FANS; CONSISTS OF OFFICIAL LEAGUE SPONSORS

Looking to invest in sports, but not confident in your ability to select individual equities? SportsETFs has launched a Pro Sports Sponsors Index, consisting of 66 companies that are official sponsors of the 4 major sports leagues. Trading under the symbol (BATS: FANZ), the equally weighted index is a collection of highly recognizable brands including Coca Cola (KO), Pepsi (PEP) and McDonald’s (MCD). With sports media rights set to increase at a compound annual rate of 5.5% through 2020 and with sports sponsorships expected to increase at a compound annual rate of 3.9% over that same time period, the ETF hopes to capitalize on the growth potential associated with pro sports league partners.

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There’s a new way to bet on the companies that bet on sports

Fan Marino says: I found it noteworthy that NASCAR sponsors were not included. I was looking forward to seeing Carl Long’s marijuana-vaping company, on the list.