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Think you have what it takes to beat the NFL?

Today's Financial News - Posted September 3, 2009

One of the best investments of the year is surprising plenty of investors. While the equities market recovers from a 40% fall, the NFL remains a financial stronghold.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): During a year when the value of just about everything dropped, consumers put a plug in the cash spigot and some of the nation’s biggest brands headed to bankruptcy court, one of the best investments of the past twelve months is raising some eyebrows.

Sure, it will take well over a billion bucks to get yourself in on the action, but it’s worth taking a look at. I am sure we can learn a thing or two.

According to a report by the good folks at Forbes (I have to say that since they put me on their TV show), owning one of the 32 teams competing in the National Football League (NFL) would have been a market-beating investment over the past year.

Normally, I am not a big fan of sports statistics, but these box scores are worth checking out.

Tighten your jock straps, boys

First off, across the NFL, revenues rose by a hefty 7% over the last year. Not bad considering many companies are shrieking from the pain of double-digit contractions.

Overall, the league was worth revenues of $7 billion.

On average, NFL teams were worth some $1.04 billion, no different than last year’s figure. Again, with the equities market down by 20% from this time last year, the mere fact that teams were able to maintain their value says a lot about the industry’s strength.

Anybody that has ever taken a basic statistics class knows that averages (or means) can be misleading. One asset could have doubled in value while another went bankrupt and yet the mean would show us nothing.

Fortunately that was not the case with the NFL. In all, only eight teams lost value, with Oakland putting in the worst performance, shedding 7% of its value. The Raiders franchise is worth a cool $797 million.

They’re still playing?

On the other end of the spectrum, the Dallas Cowboys is the most valued team, with a worth estimated at $1.65 billion, up 2% from last year’s figure (probably more now that Jessica is out of the picture).

So what does the balance sheet of an NFL team look like?

There are a few less zeroes than you would expect for a company with a price tag approaching two billion bones.

Revenues (just the cash collected at the $1.2 billion stadium) for the Cowboys came in at $280 million, which was boiled down (thanks in part to $165 million in player expenses) to an operating profit of $9.2 million.

Of course, these figures are a bit misleading. An NFL team makes money from a host of things outside of its normal operations, which are not included in the above figures. Those lucrative licensing agreements are the first to come to mind.

I realize few of us have a checking account big enough to handle purchasing an NFL franchise, but this story does have value to the everyday investor.  It helps to illustrate some of the safest investment do not necessarily come from the ever-popular world of equities.

As stock investors, we need to realize we are somewhere closer to the lower end of the risk/reward ratio. Sure, we have realistic shots at doubling our money in just a couple of weeks, but there is also the chance we could lose a good portion of our investment.

If that phenomenon sounds scary to you, maybe it is time to check out a safer means of securing your money… like a football team.


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Posted by Andrew Snyder · Filed Under Featuring..., Investment Strategies 

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