✈️Manchester (Not So) United⚽

After a Super (League) crazy week, CEO Alan dives into $MANU

👋Welcome!

What is up Cruisers?! Alan here! First and foremost, I want to let everyone know that we are officially over 700 subscribers! Thank you for being a part of the Cruising Altitude journey and we are just getting started!

We are also excited to share that we have a new section this week called “Keeping it 100!”, where I share how I would invest $100 this week if I was just getting started.

I also recorded myself reading this week’s newsletter and added some commentary on top of the writing! The recording is only 20 minutes and is fun and good vibes (and you do not have to read!)

Give the podcast a listen on Apple Podcasts by clicking here

Also, the CA team and I love feedback and would love to hear your thoughts! Feel free to reach out directly to me & either share your thoughts on CA or just say hello at asoclof@umd.edu

Showtime!

🗒️Meme Of The Week

Golden.

In many ways, I think Morgan is kidding, but the more I think about it, he might not be. The world is scary. Twitter scrolling is (usually) safe.


💸Portfolio Update

The portfolio is a little bit colorful! What are all the colors about? Under the “Ticker” column we have instituted a color-coded system that allows Cruisers to see how excited the CA team is about certain stocks.

Here is the breakdown:

🟩Absolutely Ecstatic🟧Just Ecstatic🟨Some Concerns 🟥Big Concerns


📰Portfolio News

  • 🧠 BrainWow. On Monday, portfolio pick BrainsWay $BWAY announced that the FDA has approved yet another one of their revolutionary, non-invasive treatment options. The company received approval for its “Theta Burst three-minute protocol” which uses their patented dTMS technology to lower treatment time from around 20 minutes to just 3 minutes.

  • 👋 Hola. More big news out of ViacomCBS $VIAC this week as its free streaming service, PlutoTV, announced that it will unveil PlutoTV en espanol starting in early May. This will nearly double the Spanish content available to viewers across the world for FREE. PlutoTV is quickly becoming one of the leaders in the streaming wars and ViacomCBS is rolling with the momentum!

  • 🚀 $PENN to the Moon...or at least to $151 according to predictions by investment firm Needham Capital. Needham analysts see $PENN as a major player in the rapidly growing industry of sports gambling. They believe that as sports betting becomes legal in more and more states, $PENN will be a main beneficiary and their stock price should increase.


🎮Trivia Night!

A question you shouldn't know the answer to but will serve as a fun way to learn more about the portfolio picks or the Spotlight company.

Question:

The Glazer family, who owns a majority of Manchester United , also owns which NFL team?

A. New York Giants B. Los Angeles Rams C. Tampa Bay Buccaneers D. Green Bay Packers 

Answer: C. The Glazer family bought the Bucs in 1995 for an NFL record (at the time) of $192 million. The Bucs today are worth $1.51 billion. That is what you call a good investment.

Any excuse to show this awesome GIF of Tampa Bay Bucs QB Tom Brady a drop intoxicated after the Super Bowl is an opportunity we will pounce on. Watch and enjoy!

🔍Spotlight: $MANU

Introduction

  1. Market Cap- In Cruising Altitude, we often describe the value of a company using the phrase “market cap”. Market cap is the number you would see for the valuation of the company when you go on your iPhone stock app. The equation for market cap is number of shares existing times the stock price. So if a company has 10 million shares and the stock price is $10 a share, the companies market cap (value) would be $100 million.

  2. Enterprise Value- Enterprise Value is one level more complicated than market cap as it takes the debt of the company into account. For example, if the market cap of a company is $10 billion but they have $3 billion in debt, the enterprise value would be $13 billion. The debt of the company is important as if you were to buy the company, you would be responsible for paying back the existing debt!

⚽Don’t Mess With My Sports

Growing up I LOVEEEEED sports. I would spend as much time as possible outside playing sports, inside watching sports, and spacing out in class (as I have mentioned before) thinking about sports.

As the years have gone on and I have matured (slightly), I definitely spend less time with sports but interestingly, I think I love it more. Life as an adult (or I guess 23 year old kid) can be complicated- especially in today’s social media/connected world.

And then there are sports, where everything is so simple and the best of humanity shines. Teamwork. Comradery. Passion. Fun. Sports are a beautiful thing.

Yes. Money is a big part of it but most of that is handled off the field. On the field, it is just a child’s game. And it is awesome.

Last week, there was some pretty big news regarding the creation of a Super League. I am sure many of you read about it, but for those of you that did not, to make a very long story short, a bunch of the biggest soccer teams in the world wanted to be the founders of a new league that guaranteed them a spot in the playoffs every year. This would virtually mark an end to the Champions League, the current playoff format, which simply put, is the most beloved competition in the world.

It is not a big deal in America (yet) but in the world, it is. For example, in 2015, 114 million people tuned into the Super Bowl world wide while 340 million people tuned into the Champions League Final. The Champions League is basically a March Madness style tournament that ends with a Super Bowl like game. It is huge. Why would they do something that sounds so ridiculous? Money and human greed. Duh. That is usually the answer.

The Super League would have meant the end to the most beloved, open, competition in the world. Fans’ and players’ childhood dreams would have been crushed, all for a few bucks.

It was devastating. It was sad. Thankfully, the uproar by fans and key stakeholders showed the power of unity and basically threatened to boycott their teams if they moved forward with the (not so) Super League set-up. Beautiful.

There was a rebellion calling for higher values and higher standards and it worked. It looks like the Super League has failed and the values of sports live on. Yes. I write a financial newsletter so it might be ironic coming for me, but money is not everything. Some things (maybe even many things) matter a lot more.

👕 $MANU

One very cool thing about European soccer is that a few teams are actually publicly held. Yes- this means you can own part of a sports team! One of these teams is Manchester United (who tried to join the Super League- booooo!!!) and we thought this would be a perfect week for a Cruising Altitude breakdown.

Every year, the famous business magazine Forbes releases their valuations of professional sports franchises, and they are always very close (usually slightly under their true valuations.)

  • Last year, the Utah Jazz sold for $1.66 billion while Forbes had them valued at $1.55 billion

  • The New York Mets were sold for $2.42 billion while Forbes had them valued at $2.4 billion

Forbes is really good at this and rightfully so. The company has a lot of inside sources and knowledge of the current prices being thrown around as the financials of these usually private teams are not usually released to the public- they are not just guessing.

Forbes, as of 2021, gave Manchester United a $4.2 billion valuation and as we saw from the examples with the Jazz and Mets, $4.2 billion is a number I am confident in.

Check this out, too: in 2010, Manchester United, according to Forbes, was worth $1.8 billion. The valuation has more than doubled in the past decade, and I think the valuation will be much higher than $4.2 billion 10 years from now. Why? Legacy media companies need sports to succeed and TV deals, a main revenue generator for sports teams, are getting more lucrative, deal to deal. It is basically the last of type programming that people watch live. Additionally, as the Amazons of the world start entering the fight for sports rights, you can bet the bidding process will continue to get more and more lucrative.

So basically, this company should be worth more than $4.2 billion on the market.

Wrong. Interestingly, Manchester United, is trading at a $2.77 billion valuation, representing a 35% discount to the Forbes valuation. What are we missing. Why isn’t everyone buying $MANU?

Two reasons:

  • Enterprise Value (EV)- As we mentioned earlier, Enterprise Value is important and usually the main metric people look at when looking to take over a company. Manchester United has around $600 million in debt which would put the company’s EV at $3.3 billion (which still represents 27% upside).

  • Revenue Loss from COVID- We at Cruising Altitude have two main things working for us in this regard: 1. We are long term investors. 2. We have perspective. Yes, $MANU’s revenue was down 20% in 2020 due to COVID, but stadiums will be full again in the near future and the revenue loss will bounce back. With perspective, we know this. We are patient. We are not concerned.

Golden Nugget: The Glazer family who owns Manchester United (and are under a ton of scrutiny as you may predict) recently stated that they would sell the team for “no less than” $4 billion. Seems like getting this thing under an enterprise value of $4 billion is a steal.

👕 Wrapping It Up

In today’s crazy market, people want to make money quickly. They want to be able to invest in companies that have a chance to crush earnings and see huge short term returns. When you own a soccer team, you do not own them to crush earnings, you own them either for asset appreciation (likely conservative yet stable) or because it is just cool (which is okay too!).

Are we adding $MANU to the CA portfolio? No, we are not. Why? Our portfolio is getting a little big! Diversification is good but too much diversification is not (in our eyes). We believe in having confidence in our picks and being more on the concentrated end. Additionally, portfolio pick $MSGS is a very similar investment- two sports teams trading under their current valuation. We like that one especially because US sports are more in our team’s expertise. You can’t own em all! We are passing on $MANU!

-Alan


🤝Meet A Cruiser: Gavri Steiger!

What is your education history and current job status?

I am 18 years old and from Cleveland, Ohio. I am a senior in high school and will be attending WashU this upcoming fall where I will be studying Economics and Philosophy.

What is your favorite part about Cruising Altitude?

It is a medium to learn about stocks and investing that's specially designed for GenZers like me; combining entertainment through tweets, memes, GIFs with education through quality and concise investing analysis. 

What is your favorite portfolio pick and why?

Invitae $NVTA. Since I am at the early stages of my education/career, I have a lot of patience with my investments. I agree with Cruising Altitude that $NVTA has a chance to be one of the next giants in the biotech/medical industry, and I look forward to being on the journey with them even if it takes sometime!


💯Keeping It 100!

People ask me 100 times a week what they should invest in. I like talking stocks and sharing ideas with people but 100x is a lot! Therefore, the CA Team and I decided to start a new section of “where would CEO Alan invest $100 THIS week!”

Remember- I am not a financial adviser. This is not financial advice. I am just sharing what I would do.

Here are my picks:

  1. $VIAC- $35- ViacomCBS is trading at a valuation of less than 1x revenue and is absolutely crushing it in streaming due to its multi-pronged approach of PlutoTV, Paramount+, Showtime, and more!

  2. $NVTA- $35- Invitae a genetics company that has a value proposition significantly greater than its current $7 billion valuation (for a full CA write up on the company click here).

  3. $SFM -$20- Sprouts Farmers Market trading at 7x free cash flow and a serious share buyback program, the grocery store looks like a slam-dunk. For a full CA write up on the company click here. Wondering what Free Cash Flow and Share Buyback Programs are? For another time! We do not want to make this section too long! You can shoot me an email, and I will gladly explain.

  4. Cash- $10- Always have some cash so you can pick up more of your beloved companies if they dip!


💭Final Thoughts:

  • “Sports franchises are how we knight you in this country”

-Bobby Axelrod, protagonist in TV show Billions (ViacomCBS asset)

I think this is so true. Sports teams at a fair valuation (especially in the US since we do not have royalty) could be one of the best places to put your money if you are looking for low risk and steady growth.


✈️Thanks for Cruising with us! Follow us on Twitter and subscribe to get the newsletter delivered straight to your inbox!
- Alan & The Cruising Altitude Team

Disclaimer: Cruising Altitude (CA) is not a professional financial service. All materials released from Cruising Altitude are for educational and entertainment purposes. CA is not a replacement for a professional's opinion. Members of Cruising Altitude might have positions in the equities in the Cruising Altitude Portfolio or mentioned in the newsletter.