Which stocks will outperform as a result of the 2014 World Cup?

<p>Will the World Cup affect the share performance of major companies? In May of this year, we compiled a list of 25 companies deemed most […]</p>

Will the World Cup affect the share performance of major companies?

In May of this year, we compiled a list of 25 companies deemed most likely to amass a notable share of revenues from the FIFA World Cup, currently underway in Brazil. (The tournament started on 12th June and is set to end on 13th July.)

Below is a matrix of these companies’ performance in terms of percentage return and 30-day volatility from 1st June to today.

The shape and heat colour of each label is in function of PE ratios and price performance (price returns) over the last five days.

Sporting goods

Sports Direct International
With over 400 stores and a portfolio of brands that includes Dunlop, Slazenger, Everlast amongst others, Sports Direct’s share price has grown consistently since 2009.

Since January 2009, the share price has risen from 44 to 507 as of the 13th December 2013. It’s P/E (ttm) is 2,844 -indicating a high confidence in the share’s growth. However, this could also indicate that the share is over-priced. Prior to and during the World Cup 2010, its share price rose sharply.

Sports Direct is expected to sell a considerable amount of sports apparel right before and during the World Cup 2014; however its recent spat with Adidas could mean that they would lose out on Adidas football shirts sales, unless the issue is resolved. One has to note that Adidas sponsors major teams such as Germany, Spain or Argentina.

Nike
Nike has a powerful marketing strategy that consists of a large number of celebrity endorsements as well as setting in new trends and  new sponsorship deals.

Nike’s share price has also known considerable growth since early 2009, when the share price was revolving around 20. It’s currently trading at over 75.

Although not a FIFA partner like Adidas, Nike supplies kits for 10 World Cups, including Brazil, England, France and Portugal. It’s P/E indicates high growth prospects as well as a reasonable valuation.

Adidas
FIFA’s official partner as well as the sponsor of major teams, Adidas will have a significant exposure during this global event. Since 2009, the brand’s share price experienced a stronger growth than Nike’s share price. From 26 in early 2009 to over 85 in December 2013.

Its high P/E (ttm) ratio of 34 also indicates confidence in Adidas’s growth. Adidas sponsors the German, Spanish and Argentinian national teams, amongst others.

Puma
Puma produces lines of shoes and sports clothing with sponsorship of eight national squads in the 2014 World Cup of most national squads in the World Cup.

Puma owns 25% of American brand sports clothing maker, Logo Athletic, which is licensed by American professional basketball and association football leagues.

Puma has been part of French group, Kering, (formerly known as Pinault-Printemps-Redoute or PPR).

Beverages, food and leisure

AmBev
Although a subsidiary of the much bigger AB InBev, AmBev remains the largest brewery in South America. With the World Cup taking place in South America, it’s no surprise that this company is likely to experience a strong increase of sales.

AmBev is listed in the Bovespa as well as the NYSE.

On the NYSE, the share price over the past five years increased by over 390%. Its P/E of 19 also makes the share relatively attractive.

Mitchells & Butlers
The largest operator of restaurants, pubs and bars in the UK. Brands include Sizzling Pubs, O’Neill’s, All Bar One.

Marston’s
Marston’s operates over 2000 pubs and is also the largest brewer of cask beer in Britain.

Greene King
Operates over 2300 restaurants and pubs across the UK. The company is also a major ale brewery.

All three companies have seen a rise of their share prices. And, although sales of beer has decreased over the past few years, particularly during 2012 and 2013, these pub chains have managed to grow and remain profitable.

Summer is a high season for pubs and bars, the added effect of the World Cup games will boost sales.

Anheuser-Busch InBev
The world’s largest brewer with a portfolio that includes Budweiser (World Cup Sponsor), Corona, Stella Artois, Beck’s, etc. All major brands sold in the UK.

Greene King
One of the leading pub and brewing companies in the UK. Greene King operates 2,300 managed, tenanted, leased and franchised pubs, restaurants and hotels.

Diageo
Alcoholic beverages company based in London.  Brands include: Guinness, Red Johnnie Walker, Smirnoff, Captain Morgan, Guinness and Red Stripe.

Diageo operates in Brazil which is the number one market for Johnnie Walker Red Label in the world.

The Coca-Cola Company
Coca Cola is a FIFA official partner

The McDonald’s Corporation
FIFA World Cup sponsor

Broadcasting

ITV
The UK broadcaster will share the World Cup’s fixtures with the publically funded BBC.

ITV’s share price has increased by 78% over the year and by 384% over the past 5 years.

ITV launched a large-scale business reorganisation that resulted in a reduction of the company’s debt and an increase of profits considering that ITV recorded a loss of 2.7 billion in 2008.

Industry analysts currently recommend buying and holding ITV shares.

Grupo Televisa
This company is the largest listed mass media group in Latin America. Grupo Televisa will have the broadcasting rights for Mexico, the second most populated country in Latin America.

Over the past five years, the share price has increased by nearly 90% and by 16% over the past 12 months: a steady and consistent growth.

The advertising revenues of the World Cup should enable further growth of the share price.

Airlines

LATAM Airlines Group
With the World Cup taking place in a Latin American country, it’s expected that fans will use local airlines to travel – not only within Brazil but also from neighbouring countries. With the largest fleet in South America, one can only expect a rise in revenues during the World Cup timeframe.

Although not performing as well as other companies, LATAM Airlines performance is in line with the Airlines industry and its share price has increased by 84% over the past five years.

Gaming

Betfair Group PLC
Betfair is the world’s largest internet betting exchange and continues to grow as a business with a share price growth of over 42% during the past 12 months.

With the significance of an event like the World Cup, Betfair will attract more revenue. Investment analysts expect the company to outperform the market with a dividend growth of 27% over the current year.

The strength of Betfair lies in the fact that punters are able to cut out the middleman by betting against each other, which makes it very similar to a stock exchange. Betfair also reduces its exposure as it doesn’t bear the risk of the bet. On top of that, its technology is proprietary and copyrighted in multiple jurisdictions.

William Hill PLC
William Hill is a much larger company, with a high street presence as well as an internet presence.

Investment analysts expect the company to grow throughout 2014: hence recommending buying or holding the share as of December 2013.

Over the past 12 months, the share price increased by 16%. Over the past five years, the share price increased steadily by over 170% outperforming the FTSE 100 Index.

William Hill’s strength lies in its high street presence with over 2,390 betting shops across the UK. The company also expanded internationally in countries where online gambling is regulated but not banned: Australia, Nevada (US), Italy and Spain.

Bwin.Party Digital Entertainment PLC
Bwin, also a large online gambling company, has seen its share price sharply fall in 2011 and 2012.

Over the past 12 months, its share price increased by nearly 11%. Although the company turned a loss of £428m in 2011 and a loss of £63m in 2012, analysts are recommending buying its shares based on the potential boost from the World Cup as well as the company’s potential in the US, where online gambling laws are being relaxed.

Analysts believe the company is past the challenges it experienced over the past few years and that Bwin is back on track.

Its new operations in New Jersey have also given the company an advantage in the US. The company has managed to increase its revenues in 2012, resulting in an improvement of net income.

Tobacco

Philip Morris International versus British American Tobacco
The two largest tobacco companies in the world have experienced a strong rise of their share prices over the past five years, with very similar trends in share price fluctuations.

Industry analysts advise that these companies will outperform the market and recommend buying into their shares.

With the demand for traditional tobacco declining over the past few years, these companies still managed to increase their profits.

British American Tobacco (BAT) has already entered the growing electronic cigarettes market with its Vype products.

Philip Morris International has announced plans to enter the market mid-2014.

Tobacco companies are investing heavily in R&D to develop alternative products as tobacco regulations in the Western world are becoming tighter. These companies are also turning towards the developing countries as these have less strict regulations.

Souza Cruz
Controlled by British American Tobacco, Souza Cruz is the market leader with 60.1% of the Brazilian market. From production to distribution, Souza Cruz services over 300,000 retailers in the country.

Although over the past 12 months the share price has dropped by 31.6%, the company’s share price grew by 133% over the past five years, outperforming the IBovespa index.

The company’s P/E (ttm) of 20 indicates confidence in the share’s price growth.

Retail & Credit Cards

Cielo
Cielo is the largest Brazilian credit and debit card operator. With over 600,000 extra visitors expected for the World Cup on top of the regular tourists, this company is likely to see a high increase in profits, especially considering the popularity of electronic transactions among foreign visitors.

Since mid-2009, the share price of the company has increased by over 160%. Its P/E (ttm) is just over 20, which indicates healthy prospects.

VISA
FIFA official partner

Dixons Retail
One of the largest consumer electronics retailers in Europe. In the UK, Dixons operates Currys and PC World.

Sony Corporation
FIFA official partner
Retun vs volatility

 

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