Whether it’s tech stocks or sporting teams, go for ‘franchise assets’

Recent billion-dollar sporting team deals demonstrate why it’s important to be selective when choosing global equities. Pendal’s ASHLEY PITTARD explains

• Choose the top one or two stocks in a sector
• Find out about Ashley Pittard’s Pendal Concentrated Global Share Fund

THE record-breaking $US6 billion sale of the Washington Commanders NFL team last month is the latest in a rush of billion-dollar transactions involving trophy sporting teams.

If you can choose the right sporting “franchise” to buy, the returns are eye-watering.

The last time there was a rush of sporting team sales was around 20 years ago – and their value has soared around ten times since then.

What’s that got to do with stocks? A lot, says our head of global equities, Ashley Pittard

Ashley and his investing team haven’t bought any sporting teams lately.

But like the most successful sporting team transactions, Ashley focuses on what he calls “franchise assets”.

It’s all about being selective, he says.

Look for franchise assets

“Franchise assets – companies that are number one or two in their space or are monopoly or duopoly business – are also highly valued among investors at the moment,” Ashley says, pointing to the tech leaders dominating Wall Street.

Pittard’s Pendal Concentrated Global Share Fund focuses on franchise assets such as airports, Boeing and Airbus, stock exchanges, brewers, major banks and select technology companies.

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Being selective — choosing the top one or two players in a market — is key, just as it is when buying a sporting team.

“Last month, the Washington Commanders NFL team in the US was sold for just over $US6 billion,” Pittard notes. “In February this year, the Phoenix Suns basketball team was sold for $US4 billion.

“Michael Jordan recently sold the Charlotte Hornets for $US3 billion. And English Premier League giant Manchester United is, reportedly, close to being sold for £6 billion.”

Compare those values to sports sales 20 years ago — around the time of the last tech boom.

“The Washington football team was sold in 1999 for $US600 million. In 2004 the Phoenix Suns was sold for $US400 million.

“The Charlotte Hornets went for $US300 million in 2003 and Manchester United was sold for £300 million,” he says.

“These assets are trading for around ten times what they sold for back then.”

The tech franchises

In the world of investing, it’s also interesting to observe when trophy assets change hands, says Pittard.

Last time the there was a rush of sales of sporting teams, the technology sector in the US was dominated by the ‘Four Horseman’ – Microsoft, Intel, Cisco and Dell.

They comprised about 17 per cent of the weighting of the S&P500.

“If you look today, the magnificent seven, which are Apple, Microsoft, Alphabet, Amazon, Meta, Tesla and Nvidia, comprise about 20 per cent of the market,” Pittard says.

“The Four Horsemen had unquestioned market dominance and the magnificent seven today have unquestioned market dominance in their fields.”

The similarities between the last tech boom and trophy asset sales back then, and what’s happening today are worth considering, Pittard says.

“The sales of sports franchises don’t come up that often. They are high in demand. Usually sales happens when there is a crisis or valuations get extreme. It’s interesting to watch what’s happening with these franchise assets.”

“The lesson for investors is that you want to be selective, and you want to be concentrated when investing.

“You also want to be defensive because there are uncertainties in the world around the macro-outlook and credit.”

About Ashley Pittard and Pendal Concentrated Global Share Fund

Ashley Pittard leads Pendal’s Global Equities investment boutique. He is responsible for setting the strategy, processes and risk management for the boutique and its funds including Pendal Concentrated Global Share (COGS) Fund.

Ashley has more than 24 years of finance experience, including roles in petroleum economics, global energy investment analysis and 20 years as a global equities fund manager.

Pendal COGS Fund is an actively managed, concentrated portfolio of global shares diversified across a broad range of global sharemarkets.

Find out more about Pendal Concentrated Global Share Fund

Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.

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