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Partly a beautiful game

If they wear their mercenary hats, there is only one question investors need ask about Manchester United (US:MANU) in particular and quoted football clubs in general following last week’s hype and hysteria surrounding the shock conception and ultra-quick abortion of the European Super League: does the combination of passion and filthy lucre revealed by that project make ManU’s shares a compelling investment? Probably not; though how that conclusion is reached tells us more about investing than the assessment itself.

The explanation starts with Charlie Frobisher, a senior partner at the City broking firm where Bearbull was a lowly analyst on the consumer-sector desk in the early 1980s. Charlie owed his success to his ability to drink clients under the table (this was the 1980s), although his intellectual capacity rivalled that of a gnat. Hence the same question whenever he passed the consumer desk in an agreeable frame of mind (ie, he had just generated bucket-loads of commission): “How much extra profit would BATS make if everyone in India smoked five cigarettes a day?”

The analogy with the elite-level football today isn’t a million miles away. Recall what Warren Buffett once said about the tobacco industry: “I’ll tell you why I like the cigarette business. It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.” Even Charlie Frobisher would see that football is the modern-day equivalent of tobacco, except it doesn’t come with the health hazards. Certainly it is addictive and the brand loyalty makes Marlboro man’s efforts look puny. That attracts money makers. Which is why the people who run Man Utd, whose love of money may equal Charlie’s, continually ask themselves an equivalent of Charlie’s question: what would it do to profits if we generated an extra 50p a year from each of our fans?

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