News Analysis date published New: 
Thursday, January 24, 2013 - 16:00
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Thursday, January 24, 2013 - 16:00
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Thursday, January 24, 2013 - 16:00

Markel Corp Larger Than S&P 500 Component Robert Half International Inc.

Thursday, January 24, 2013 - 4:00pm

One of the best investments in the 21st century has been professional sports teams. In 2000, there were 114 major sports teams in the United States and none of them have declined in value during the past 12 years.

Only two teams, the National Hockey League's Colorado Avalanche and New York Islanders, failed to gain at least 10% during that time. The biggest winner, Major League Baseball's Minnesota Twins, increased more than 15.4% a year on average. While these teams might be among the best possible investments, few sports fans or investors can afford to buy their own team.

According to Forbes, the Manchester United European football (the sport Americans know as soccer) team is the most valuable sports team in the world. In July, the latest available data showed that the team was valued at $2.23 billion, according to Forbes, which is the leading source of publicly available information on the value of sports teams. After that valuation was published, Manchester United (NYSE: MANU) completed an IPO on the New York Stock Exchange. Now, stock and bond market investors value the team at more than $3 billion.

European soccer is one of the most widely-followed sports in the world and there are an estimated 695 million fans of Manchester United in more than 200 countries. The team's league, the English Premier League, recently signed a three-year deal for television rights that is worth $4.8 billion, about $1.6 billion a year. For comparison, the National Football League (NFL) television rights are worth about $3 billion a year. Major League Baseball earns about $1.6 billion a year from television, and the National Basketball Association rights are worth about $900 million a year.

Since the IPO, Manchester United stock has traced out a bottoming pattern and appears ready to deliver a quick gain to investors. Its limited trading history of less than six months makes technical indicators difficult to interpret. Other than price pattern analysis, the 20-day moving average (MA) could be a useful tool for traders.

Due to Tuesday's big move up, Manchester United is trading at the initial price target established by the bottoming pattern. With a move above $17.11, the next price target is $20.09. The company is scheduled to announce its latest quarterly earnings in mid-February, and that news event may bring the stock to the attention of investors.

Manchester United could become a stock sought after purely for the emotional satisfaction a sports fan gains from owning part of its favorite team. In the United States, the NFL's Green Bay Packers occasionally raise funds by selling stock to investors. Although that stock carries no rights and is not publicly traded, it comes with a certificate that informs other fans of the owner's status, and last year the team was able to sell about 300,000 shares at $250 each. Fans of Manchester United could create similar demand for the stock, and that could offer support to the price.

This is a stock with an interesting pattern that could see irrational bouts of buying as the team performs well on the field. An appearance in post season playoffs or a league championship could add to the stock's appeal. In Britain, betting on sports is legal and the team is favored by bookmakers to win the championship this season. That factor alone could push the stock to new highs.

Action to Take --> Buy Manchester United at $17.10 a share or higher. Set initial stop-loss at $14.63, the 20-day moving average, and then continue to use the 20-day MA as a trailing stop. This MA will rise rapidly, so be sure to raise the stop as the risk will decrease sharply as the MA rises. Set initial price target at $20 for a potential 17% gain in 4-6 weeks.

This article originally appeared on
Traders Could Score Double-Digit Profits in 4-6 Weeks With This Stock

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Michael J. Carr does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.

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