Check the Media to Score From the NHL
Jake is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
At first glance, the NHL may not look like the most attractive sports league to put your money into, considering that 13 teams lost money last year. After a long lockout, though, the NHL has returned to the ice with a collective bargaining agreement that should make it easier for owners to turn a profit. For hockey fans and ordinary investors, there are a few opportunities to own a slice of a franchise, and this can translate into profit of your own.
While a lot of hockey owners are in the red, media companies happen to be some of the most successful NHL investors. For example, the Toronto Maple Leafs, partially-owned by Rogers Communications (NYSE: RCI) and New York Rangers, owned by Madison Square Garden (NASDAQ: MSG), are the two most financially successful teams in the league.
Rogers Communications may not be very familiar to Americans, but the corporation is huge in Canada. The company is well diversified, as it not only is the largest cable TV provider in Canada, but also has assets such as magazines, radio stations, cell phone networks, and sports teams. Rogers owns the Toronto Blue Jays outright, and also has a 37.5% stake in Maple Leaf Sports & Entertainment, which owns the Maple Leafs and other teams such as the Toronto Raptors.
As a Canadian company, Rogers is listed on the Toronto Stock Exchange, but it’s also cross-listed on the New York Stock Exchange. While either listing makes a fine investment, for the sake of simplicity I will only refer to the stock on the NYSE.
While the stock does not have a ton of growth potential, Rogers is a safe pick to add to your portfolio. Revenue is only projected to grow at 2% next year, but the EPS is expected to increase slightly to 3.25 for 2013. At a P/E ratio of just over 16 and a 3.5% yield, the risk is very limited, and the stock should at least allow you to keep up with inflation.
New York State of Mind
Unlike Rogers, Madison Square Garden is relatively small because it was spun off from Cablevision in 2010. Though it has less protection from diversity, it has strong assets in addition to the Rangers such as the eponymous arena, a few TV stations, and the New York Knicks.
MSG’s stock has nearly doubled over the past year, and with a P/E ratio of over 36, there’s some risk that the stock could be overpriced. On the optimistic side, the company beat EPS estimates the past five quarters, so there’s reason to believe the growth can continue. Since there’s now labor peace in both the NHL and NBA, and both the Knicks and Rangers have become top teams, MSG has a promising future.
The Winning Goal
While Rogers and MSG have the two best NHL investments, media conglomerate Comcast (NASDAQ: CMCSA) is also in on the game as well, with a majority-share of the Philadelphia Flyers. The Flyers don’t bring in as much revenue as the Maple Leafs or Rangers, but they still operate in the black and have the eighth highest valuation in the NHL. Plus, Comcast owns NBC, which has a 10-year, $2 billion deal to broadcast national games. So far, NBC Sports Channel has seen a significant uptick in NHL ratings over last year. In fact, the January 23 matchup between the Bruins and Rangers marked the highest rated cable hockey game in 11 years. Time will tell if this is just a result of pent-up demand, but it does seem to be a good sign that fans are not abandoning the sport.
Like Rogers, Comcast has the diversification necessary to mitigate risk, but it has better long term growth potential. Rogers has a 5-year expected earnings growth of under 4%, whereas Comcast is projected to reach nearly 13% growth. This doesn’t meet MSG’s estimate of 23.5%, but that’s the tradeoff for having less uncertainty. Also, Comcast offers a 1.6% yield, which may be modest, but still provides an incentive.
So if you want to become an NHL owner, Comcast looks like the best overall pick compared to Rogers and Madison Square Garden.
JakeSafane has no position in any stocks mentioned. The Motley Fool recommends Rogers Communications (USA). The Motley Fool owns shares of Madison Square Garden. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!