Euro 2016 market preview: which sporting stocks will make it past the group stage?
19:00, 06 June 2016
· By CMC Markets
Ahead of the start of the European Football Championships on June 10th, Colin Cieszynski looks at how stocks of sports equipment and big sports advertisers fare around major tournaments.
Within this special report Colin Cieszynski focuses on:
• How exposure for general consumer advertisers during the tournament improves stock performance
• How stock performance for athletic equipment companies including Nike and Adidas both performed worse during tournaments than in the periods just before and after
• The impact big sporting events has on social media stocks
• How major tournaments boosts the hosting country, but not its stock market
The eyes of world sports fans will descend on France over June and early July for the 2016 European Cup finals. Tournaments such as this can shine global exposure on the beautiful game, tournament sponsors and athletic equipment companies in general.
A look at how stocks and markets acted just before, during and after the last three major football tournaments, the 2012 European Cup, 2014 World Cup and 2015 Women’s World Cup showed mixed performance.
Exposure during the tournament for general consumer advertisers appears to have translated into improved stock performance for brewer Anheuser Busch, McDonalds, Sony and Johnson & Johnson. For these companies, gains were fleeting, however, as their shares fell back afterward. Coca-Cola and Visa are two major advertisers that were able to hold on to their gains afterward.
Stock performance for athletic equipment companies varied significantly. Shoe companies Nike and Adidas both performed worse during tournaments than in the periods just before and after. These companies rely more on sponsorship or specific players and teams, and that could actually be dragging on their shares during play. Considering that only one team can win it’s possible that the disappointment experienced by fans as their favourite teams and players are eliminated could be translating into short term weakness for the stocks most closely associated with them. This weakness tends to be fleeting as shoe stocks performance has improved after tournaments and focus turns to back to club teams and regular seasons. Athletic clothing companies performance has been mixed with Under Armour underperforming well during tournaments but doing well before and especially after the matches.
During the 2015 Women’s World Cup, Lululemon a producer of athletic clothing mainly for women based in host country Canada soared 6.3% during the tournament. This was a particularly strong performance at a time when the stock was otherwise struggling, it fell 5.7% before the tournament and 3.8% afterwards. Canadian athletic clothing producer Gildan Activewear did really well in the run up to last year’s tournament but then faltered during and especially afterward.
The most well-known soccer specific stock, Manchester United, also tends to be active around big tournaments gaining is advance and then slumping afterward in classic buy on rumour sell on news action.
Big sports events also tend to generate a lot of activity in social media and can impact trading in social media stocks. The first time traders noticed was this effect was during the 2014 World Cup when Twitter had a spectacular increase in traffic which helped to spark a rally in its share price. The problem, however was that later on Twitter tumbled when the big boost turned out to be brief and not sustainable. The 2015 Women’s World Cup didn’t provide the same spike in interest, was considered a disappointment by traders and led to a 20% collapse in Twitters shares in the month following the Final. In contrast, Facebook gained 5% before and during the 2015 tournament and 10% the month after.
Hosting a major tournament brings a lot of visibility to a host country but not so much for its stock market. While Poland’s index outperformed the S&P 500 during the last Euro Cup, Brazil and Canada’s indices underperformed the S&P during their tournaments.
One has to wonder if host country traders are too busy watching matches and take their eye off the markets, or what? How the CAC performs this year may give a better idea on whether there is a host country effect in the stock market or not.
Playing in the Euro Cup final also tends to have an impact on market sentiment for the participants both positive and negative. The countries that won the last five European Championships dating back to 1992 saw their national benchmark stock indices rise 8.74% on average in the year following the tournament, outperforming the average 4.2% return for the S&P 500 and the average 1.99% return for the host country over the same time frame. In contrast, disappointment from losing a Euro cup final has carried over into the runner-up’s stock market with an average return of 7.41% in the year following Euro Cup losses.
For more information please contact:
Matt Jamieson, Vicky Robinson or Vivi McDuell at Teamspirit Public Relations on 0207 360 7878 or email@example.com
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