Luis García Álvarez, CFA, MAPFRE AM Manager
Last Saturday, April 25, the Spanish Prime Minister announced that, if the pandemic continues as expected, the next group of people, after children, allowed to go out into the streets of Spain will be those who wish to exercise outside. This decision highlights, once again, the remarkable and growing significance of sport within our society today. An increasing number of people are aware of the great benefits of physical activity and how it helps us to significantly improve our quality of life.
However, although society has long given it the place it deserves, sport remains largely overlooked as a global investment trend with great potential. If you track the large asset management market a little, it will not be difficult to find thematic funds dedicated to trends such as robotization, artificial intelligence or aging population, or focused on specific sectors such as pharmaceuticals, energy or automotives. However, there is no trace of sport in this catalog.
Its absence is particularly striking, given that, in our opinion, there are significant forces that will boost this industry’s growth in the coming decades. Young people are increasingly interested in caring for their bodies and their well-being. Our elders have, in turn, grown to recognize the importance of prevention and exercise in maintaining their health. Governments see sport as a way of reducing the enormous cost of their health systems. Companies are paying more and more attention to the health of their employees and providing them with exercise facilities.
The forced lockdown of recent months makes us realize how much we miss enjoying our favorite teams and players. The lack of competitions has also reminded us of the importance that live broadcasts have for audiovisual companies, whose digital means for connecting with fans have increased, providing a better experience for them and seeking to maximize their revenue. No other content captivates us as much as sport does, perhaps because, as Woody Allen said, it gives us endings that even cinema cannot conjure up.
For fund managers, sport also offers a way to invest responsibly in society. Firstly, supporting it helps combat obesity or unhealthy living habits that currently represent a serious global problem. Exercise helps us control our weight, look after our back, keep us younger, prevent injuries, and reduce our stress levels. Secondly, investing in this industry also means promoting and boosting a number of positive values that improve society. Sport represents fellowship, respect, a can-do attitude, determination and a drive to improve.
As Pulitzer Prize winner George F. Will claimed, “Sports serve society by providing vivid examples of excellence.”
As if this were not enough, the fact that it is an industry forgotten by many investors means that we can find excellent companies in this sector trading at prices which, in our opinion, are certainly appealing, especially when you look in Europe. Over the months, we have intensified our analysis of this industry. Currently, sports-related companies account for more than twenty percent of the portfolio of the MAPFRE AM Behavioral Fund, a European equity fund with which we are attempting to study market psychology in order to detect such opportunities.
The participants of this fund co-invest with us in companies such as MIPS (a Swedish company that has developed an innovative brain damage technology for bicycle and motorcycle helmets), Technogym (an Italian family-run company dedicated to manufacturing equipment for gyms that is well positioned to take advantage of the full potential of the data), Adidas (a German multinational dedicated to footwear and sportswear), the Gym Group (a low-cost chain of gyms in the UK), and three European soccer clubs: AJAX from Amsterdam, Olympique from Lyon and Borussia Dortmund. From our point of view, each of these companies represents a good option for positioning ourselves in favor of the growth of the sport industry.
An added benefit of physical activity is that it clears the mind and paves the way for new ideas. Perhaps, when you go for a run in the next few days, it will also provide the perfect opportunity to think about your investments. My recommendation is that you don’t give up after the first few miles. Investment is a long-distance race. Like a tennis match, it is important to resist when your opponent plays you a difficult backhand serve. However, it is even more crucial to focus on avoiding unplanned mistakes.
Precisely in an effort to meet the last objective, it will be worth our while to try to choose companies with a high chance of surviving and overcoming any crisis, however extraordinary it may be. In this sense, I am not sure whether we will still be traveling by car, flying in planes, sharing data on our social networks, or shopping in supermarkets in twenty years’ time. Do you think we will continue playing and enjoying sport?