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World Cup 2014: we ask 14 readers to pick their champions
by Elsa Buchanan on Jun 11, 2014 at 10:18
Investment professionals reveal which of the 32 countries represented in the biggest sporting event on the planet excite them the most.
With just over a day to go before the big kick off in Brazil, we ask 14 investment professionals to pick their champions in the biggest sporting tournament on the planet.
Andrew Dalton, deputy chief investment officer, SG Hambros Bank
Avoid the crowd and sentiment i.e. Brazil are too expensive and England are long odds for a good reason; we aren’t any good.
Argentina offer best value. Longer odds than Brazil and they have quality throughout the side. Recently they have managed to get the best out of Messi after a period of poor management under Maradona.
They are also helped by a favourable draw, at least as far as the quarter final.
Tom Becket, CIO of Psigma Investment Management
Why choose a team where only good things are expected? If Brazil, Spain or Argentina wins, it would be expected, you’d be paying up for quality and valuations on such teams would already be stretched.
The champions of dark horses, such as Belgium, Uruguay and Chile, are also going with the experts, so again this would be reflected in the price; these would be your high growth stocks – any earnings disappointment would see a painful de-rating.
What about the 'deep value' contrarian plays, such as England or the clowns across the channel? The former are useless and deeply uninspiring and their management does not deserve to be given the benefit of the doubt (I am missing my first world cup this millennium, focussing instead of the pre-WC trip to Miami), whilst France will almost certainly be starting fighting before the plane takes off from Charles de Gaulle airport. France is therefore a value trap.
So my outside bet and tip for the semi-finals is the US. Mostly ignored, the team plays well as a unit and have players now used to playing on the international stage. They are used to playing in the Central American heat and will be in their own time zone. Little is expected and they are in a tough group, which if they can escape will give them huge confidence. They could win their first game versus Ghana and lead the group and then have the potential to take points in their second game against Portugal.
Perception is poor, their abilities are underestimated and they are rank outsiders; it is my sort of investment.
Chris Kitchenham, head of Walker Crips Investment Management’s private client unit
NIGERIA: THE SUPER EAGLES
The Nigerian economy currently flying high like their Super Eagles football team and growing at 7% per annum. Nigeria is now the 8th largest oil exporter globally with oil accounting for around 40% of GDP, with additionally a fast growing telecoms industry makes Nigeria a good investment opportunity for a small proportion of portfolios.
We gain our exposure via Blackrock Frontiers Investment Trust managed by Sam Vecht, a safe pair of hands, which is 8% invested in Nigeria. Frontier Markets as a whole remain underinvested and under researched as an asset class making them into a prime long term opportunity.
This investment trust yields 2.7% and gives exposure to Nigeria and other fast growing economies like Qatar, UAE and Kuwait. Like the Super Eagles football team we expect a successful summer from this well-oiled investment trust.
Anne Leborgne, equities fund manager at Amundi
PICK: US AND GERMANY
Off the pitch, the major sports goods' manufacturers are likely to be among the winners, through their sponsorship of the teams’ strips, and the food & beverage industry (AB Inbev, Heineken et Carlsberg) which will undoubtedly benefit from the world’s greatest sporting event.
For Adidas, football is a major contributor to growth (12% of sales). The world cup will have a positive impact on their top line growth and their profitability: as an official partner, shirts and shoe sales are very profitable with a retail price between 30 and 60% higher than the traditional ones.
Expectations around the impact of the event are particularly sensitive for Adidas this year. Its year-to-date stock price is down 15% impacted by a weak first quarter performance affected by the depreciation of the ruble, the loss of market share in the US in basketball, as well as the exposure to the declining golf market.
Meanwhile, Nike is a big sponsor with 10 teams including the German team compared to 8 for Adidas. Large scale platform for launching its new products including the new Magista which uses the innovative Flyknit technology that will bring them greater margins. This represents a significant opportunity with a portfolio of high level innovation. In the last World Cup in 2010, we saw a significant acceleration in orders from 4% in Q2 to 9% in Q3.
Like Adidas, Puma is the sponsor of 8 teams, including Italy and Uruguay. They have lost a lot of ground which may be due partly to late product launches compared to their competitors.
Gary Reynolds, CIO at Courtiers
PICK: GHANA'S MYSTERIOUS DWARFS
In World Cup year perhaps investors should consider the fast-growing markets of Africa – and especially Ghana. The country is one of the 2014 Cup participants and a stake in one of its national league soccer clubs could be a winner and provide great media exposure for a sporting-minded entrepreneur.
My suggestion is the Mysterious Dwarfs, whose full name is Essienimpong Cape-Coast Mysterious Dwarfs. Their name is taken from the Mmoatia, a mythical one foot high African creature, usually black, white or red, whose feet are on back to front, making them difficult to track in the jungle.
The Dwarfs, who finished third last season, are a tough little outfit but vulnerable in the air at set pieces. They are currently deep in the relegation zone but funds to sign a couple of tall defenders could lead to sustained Dwarf growth. Mr Abramovich – take note!
Pau Morilla Giner, chief investment officer at London & Capital
From a macro perspective low inflation, rising employment and the growing Mexican consumer base should continue to add to growth. Improvements in Mexican productivity are aiding the investment case for multinational corporations that are already lured by shorter supply chains and the US market.
The Mexican consumer is becoming more and more important, and a favourable demographic relative to the United States is helping drive expansion.
Over the last several years, manufacturing wages in China have been rising relative to those in the United States and Mexico. This has led to more ‘nearshoring’ - companies moving production from Asia to the Americas. Late last year, the seesaw tipped, and China's average manufacturing wages surpassed Mexico’s.
One of the biggest beneficiaries of this trend has been the Mexican automotive industry. Between 2003 and 2013, Mexican production of automobiles rose from 1.6 million units to a projected 3 million.
Graham Spooner, investment research analyst at The Share Centre
While I believe the England team has all its chances, all eyes will be on these five stocks that may benefit from the World Cup - and an English victory.
ITV is amongst several broadcasting companies televising World Cup games this summer. Showing 34 games across two channels, the group has accumulated a knowledgeable and respected team of pundits and commentators. Additional benefits could come from advertising with one company reporting that the group could potentially charge a £300,000 premium for advertising rights for a period of just thirty seconds during England’s matches.
As a replica shirt retailer, Sports Direct should see an increase in sales over the tournament period. The retail group’s online operations offer a vast array of products at reasonable prices and will therefore be easily accessed by supporters across the country. Investors should be aware that as well as the official merchandise being a potential good seller, general footballing goods sales may also receive a boost - particularly if England progress further than the group stages.
The late nature of the kick offs of this year’s tournament will mean that more people could choose to stay home and enjoy the games. Takeaway pizza chain Dominos has previously done well during large sporting events and investors should acknowledge that. Immediately following South Africa’s Word Cup, the company reported a 13.7% rise in like for like sales in the six months covering the period when the tournament was played. We expect to see promotions connected to the event so this World Cup could see similar results.
With our national team at around 33-1 to win, a number of supporters are inevitably going to be tempted to have a flutter. During the last World Cup, £1 billion was gambled by British punters alone and with consumer spending on the rise, this number could increase. The global appeal of events William Hill covers means they are involved with most major sporting events and investors should acknowledge that the tournament taking place in Brazil this summer could benefit the group.
Marston’s operates 2150 pubs in the UK and will aim to gain more capital by enticing football fans to visit their establishments over the event period. Opening hours are set to be extended in some venues so the group could look to benefit from longer periods. Investors will be reassured that Marston’s started the year well and could be a beneficiary of a sporting event that is of much national interest.
Will Lander, senior portfolio manager of the BlackRock Latin American investment trust
Brazil, host nation and one of the favourites in this year’s World Cup, is also our favorite equity market in Latin America and offers an attractive investment opportunity.
Brazilian equities continue to trade among the cheapest in the world, trading currently at less than 10x price to earnings ratio for the next twelve months – having delivered double digit earnings growth last year, with similar expectations for 2014, valuation looks compelling.
The market was an underperformer during the period that Emerging Markets fell out of favor with investors – as interest in the emerging world begins to resurge, Brazil should be a beneficiary.
Finally, this year’s presidential elections could provide a major catalyst for financial markets – a potential victory by one of the two main opposition candidates would bring welcome change to government policies that have not attracted private investment over the past four years. 2014 could make Brazil a double winner – in the football pitch and in the equity market!
Michael Paul, fund analyst, Brewin Dolphin
Within our negative outlook for emerging markets, we view the Mexican economy as one of the few potential bright spots. The country is blessed with positive demographics and an enviable location given its proximity to the US. However, high levels of market intervention, corruption and organised crime, as well as a period of weak external demand, have meant this potential is yet to be realised.
This may be about to change. We believe the US recovery is sustainable, and in particular the trend to “re-shore” manufacturing will benefit Mexico due to its geographic convenience.
Domestically, the government is pursuing an aggressive economic reform agenda and has promised to pursue anticorruption legislation. If these policies are successful the economy is well placed to prosper.
James Burns, head of the multi-manager team at Smith & Williamson
Japan’s competitors in their group have a very emerging / frontier markets feel to them and all eyes will be on whether prime minister Abe’s three arrows will be enough to shoot them down. The government’s controversial consumption tax hike that was implemented on 1 April has led to much speculation over its potential impact on the Japanese economy, which has been gathering momentum.
The Bank of Japan (BoJ) refrained from adding further stimulus (currently at $681 billion per year) at its most recent meeting and the central bank is likely to gauge April’s economic data before making a response. What is clear is that Japanese equities have underperformed and are in need of another leg up.
Further stimulus from the BoJ is likely to be the catalyst for this and the more forward-looking indicators suggest it will be needed. With this in mind we remain positive on the medium-term outlook for Japanese equities and suspect another liquidity injection is just around the corner.
Fiona Manning, manager of the Aberdeen Latin American Income fund
I see the World Cup adding little to the Brazilian economy over the long-term. The infrastructure spend on the tournament and the Olympic Games will only make up a fraction of the government’s overall infrastructure investment programme.
In the short-run, some companies will benefit from the legacy, yet the bigger challenge facing Brazil is slowing growth and stubbornly high inflation. Ironically, an early World Cup exit for the home nation could add to the overall disillusionment facing the current government. President Rouseff’s government is already under pressure from the Brazilian people as public funds have been spent on hosting the games rather than invested in much needed housing, infrastructure and other social projects.
However, for us as stock pickers, the state of the economy is of secondary importance; the most important thing is that businesses continue to be well run, generating strong cash flows that can be returned to shareholders. From this perspective Brazil is home to some good quality companies that have the potential to perform well over the long term.
Marcus Morris-Eyton, portfolio manager of the Allianz GI European Equity Growth fund
Despite well documented concerns over both competitiveness and the current management team in France, the country continues to contain a core of world leading players, with the ability to shine on the international stage.
With French team morale (consumer confidence) still low and domestic growth remaining muted, many of the domestic players have suffered a drop in form (profitability). Therefore much of the success of the French team stems from players plying their trade in leagues outside France, where demand for French talent, particularly those with established brands remains strong.
The team contains an attractive blend of typical French flamboyancy in the form of fashion retailers such as LVMH and Kering, who are showing signs of regaining their top form, and industrial workhorses such as Legrand and Schneider, who are set to benefit from a European recovery.
The key to any French glory will be team (stock) selection, as there exists a wide gulf in class between many of the bigger names in the French squad, but for those that select well, there is every chance of success.
Simon Gergel, manager of the Merchants Trust
Most of the team play in the Premier League which is admired around the world, just as the London Stock Exchange is seen as a great place to do business. We have high refereeing standards (corporate governance) and respect for minorities (the takeover code). Many of our companies, like out players, are truly world class.
Within the squad, we have a good mix of young stars like ARM and Shire as well as the experienced veterans like Marks & Spencer and Diageo. We also have a broad spread of talent, with strong defensive players; GlaxoSmithKline, Unilever and Royal Dutch Shell and others more attacking minded; Prudential, EasyJet and Glencore.
A common criticism is that English players don't play well as a team. Similarly the diversity of our stock market means the FTSE, normally provides a good solid showing, with less volatility, but is rarely at the top of international stock market performance.
Hoping FTSE Index is the best performer this year is like hoping the England win the World cup. It always seems possible, hopes are raised, but history is against us. Let’s keep our fingers crossed.
More about this:
Look up the shares
- ITV PLC (ITV.L)
- Sports Direct International PLC (SPD.L)
- Domino's Pizza Group PLC (DOM.L)
- William Hill PLC (WMH.L)
- Marston's PLC (MARS.L)
- Marks and Spencer Group PLC (MKS.L)
- Diageo PLC (DGE.L)
- ARM Holdings PLC (ARM.L)
- Shire PLC (SHP.L)
- GlaxoSmithKline PLC (GSK.L)
- Unilever PLC (ULVR.L)
- Royal Dutch Shell PLC (RDSa.L)
- Prudential PLC (PRU.L)
- easyJet plc (EZJ.L)
- Glencore PLC (GLEN.L)
Look up the investment trusts
- BlackRock Frontiers (Ordinary Share)
- BlackRock Latin American (Ordinary Share)
- Merchants Trust (Ordinary Share)