The business of sports can be a great growth industry for long term investors. It seems that spending in sports rises in nearly all economic environments (pandemic excluded), and stocks related to sports often follow that trend.
If you're looking to jump into the sports investing game, Walt Disney (DIS 0.09%), Nike (NKE 1.25%), and Madison Square Garden Sports (MSGS 0.13%) are great ways to start.
Image source: Getty Images.
The business of sports media
The Disney brand may not typically be associated with sports, but it's a bigger part of the business than you might think. The company owns the ABC network and 80% of ESPN, which is arguably the most predominant network in sports. Through these two networks, Disney has content partnerships with the NFL, NBA, MLB, NHL, and other sports leagues. These networks make up a big chunk of the $11.2 billion in first-quarter revenue from linear networks and direct-to-consumer entertainment.
ESPN is losing subscribers to cord-cutting, but as Disney expands its streaming presence, this sports business could grow again. ESPN+ currently has 12.1 million subscribers, up 83% from a year ago, and it has become a natural home for sports like the Ultimate Fighting Championship (UFC), softball, soccer, and specialized commentary. And it's likely the streaming content will grow as subscriber numbers increase and sports leagues begin renewing contracts to include more streaming-distribution options.
Disney is one of the best content creators in TV and film, but don't forget that the company makes a lot of money off sports, and they're a big part of its future.
The biggest brand in sports
Nike is all about sports, and that has been a great thing for investors over more than four decades. You can see below that the company's revenue and earnings have grown steadily over time, and so has its dividend.
NKE revenue (TTM) data by YCharts. TTM = trailing 12 months.
Nike is slowly expanding its reach in the sports world over time. Michael Jordan's basketball shoes really helped put Nike on the map, but the company expanded quickly from there. Tiger Woods brought the company into the world of golf more than two decades ago, and it continues to sponsor the biggest names in sports. Today, there are very few sports the company doesn't touch in some way.
What's been impressive about Nike over time is the fact that it has remained relevant as a fashion brand for so long. The company has been a trendsetter rather than a follower, and that continues today. As the behemoth in sports gear and apparel, this is a top sports stock to own now and in the future.
Madison Square Garden Sports
The most direct investment in sports today is Madison Square Garden Sports, owner of the New York Knicks and New York Rangers. The company has had a rough year with COVID-19 restricting fan access to games, but these are still two of the more valuable franchises in sports.
Despite all of the challenges of the past year, MSG Sports is in pretty good financial shape. At the end of 2020, it had $70.8 million in cash on hand with $290.8 million of total liquidity available. And there was just $380 million of long-term debt on the balance sheet.
This spring and summer, the company is looking forward to letting fans back into the arena, which will increase ticket sales as well as sponsorship dollars. And for investors, the opportunity to own a piece of the Knicks and Rangers may be attractive.
The booming sports business
Disney, Nike, and MSG Sports are three very different ways to invest in sports, but each can be lucrative in its own way. If you're looking to make money off your fandom, these are great places to start.
