Finsbury Growth & Income Trust – one of our First 50 Funds for beginner investors has added its first new holding in two years.
Fund manager Nick Train has invested in Manchester United (MANU) football club, buying a block of shares directly from majority owners, the Glazer family.
It’s not Mr Train’s first foray into football clubs as the Trust currently has holdings in both Celtic and Juventus. Finsbury Growth & Income has also previously owned MANU - it sold its holding to the Glazers when they acquired the club in 2005.
In terms of his reasoning behind buying MANU again, Mr Train says the football club has begun to pay a dividend, but more importantly he sees the potential from football streaming rights.
Mr Train explains: “We like this quote, from James Montague’s recent book “The Billionaires Club” – he says US investors see British football clubs as “entertainment products; a studio from which a never-ending series every bit as engrossing as The Wire or The Sopranos plays out season after season. And the best bit? The network will never cancel it.””
He continues: “Note that Facebook is known to have been a recent, failed bidder for streaming rights to Indian IPL cricket matches. It will not be long now before an Internet giant bids against an incumbent football rights holder.
“The ramifications for traditional media companies will be massive, but through the turmoil we expect the value of strongly-franchised football clubs to rise.”
‘We don’t feel we’ve paid top dollar for a fashionable, hot stock’
Mr Train also cites the example of the recent sale of NBA team, the Houston Rockets, as part of his reasoning for the purchase. “Earlier this month the Houston Rockets, an NBA team, was sold for $2.2 billion. This is a new record for a basketball franchise. The seller, Leslie Alexander, had bought it for $85 million in 1993,” says Mr Train.
He adds: “One reason is the latest deal to televise basketball, which has just trebled revenues for the NBA. The Rockets generate c$250 million of revenues, meaning the franchise has been sold at c9.0x annual sales. If MANU is as valuable as the Rockets – and we think in truth its global reach makes it far more valuable – then it would command a value of well over $5 billion; more than double the current market capitalisation [$2.7 billion]. This is the scale of the opportunity we see.”
Each MANU share cost “just below $17”, which Mr Train believes is a good deal. In the fund’s August fact sheet he states: “To put our purchase in context: MANU floated in August 2012 at $14 and has been as high as $19.4, back in 2014.