Money From “Man” Sports
Reuben is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As entertainment goes, there are some niche areas that cater just to men. Sports is the big one, but key sports franchises are generally privately held or are part of much larger organizations. However, International Speedway (NASDAQ: ISCA) and World Wrestling Entertainment (NYSE: WWE) get you right into the action.
The Trouble With ESPN
If you were looking to invest in a brand that catered to men, ESPN would be the perfect choice. The channel has an industry leading position in sports. That's the main reason it's such an important part of the Disney (NYSE: DIS) portfolio. That's right, cute and cuddly Mickey Mouse muddies up owning shares in the “man sport” channel.
Of course that family focus makes Disney a ton of money, putting it at the forefront of the content market. So there's a reason why the top-line has grown in nine out of the past ten years, with earnings going from about a $1.10 in 2004 to over $3.10 last year. The dividend has been increased regularly, too. Disney is a great company and has only gotten better with its recent acquisitions of Marvel and Lucasfilm. Both of those broaden its appeal to men, by the way.
A price to earnings ratio around 20 is high but reasonable, and the yield of around 1.2% isn't enough to attract income seekers. So, growth minded investors looking to buy a diversified media giant with a notable focus on attracting men should like Disney. But, if you don't want to muddy up your “man” stocks with family fare try these two:
World Wrestling Entertainment is the wrestling company and it's a pretty pure play on entertainment geared specifically to men. However, it's better to think of WWE as a media company. Although just about all of its properties are directly tied to its wresting league, its portfolio includes live entertainment, television shows, web sites, video games, and movies. That's an important reframing of the brand.
On the plus side, WWE has no debt and a material amount of insider ownership. Moreover, it pays a large dividend, with the yield recently at around 4.4%. That said, despite its broad portfolio of offerings, it's basically a one-trick pony. And wrestling has a habit of going in and out of favor. In fact, the company's top-line has been fairly stagnant since 2009.
Earnings haven't fared much better, falling from $0.68 a share in 2009 to $0.42 last year. The dividend, meanwhile, isn't what it used to be either. It hit a high of $1.44 a share annually coming out of the 2007 to 2009 recession, but quickly fell off as results stagnated. The dividend is now just $0.48 a share a year. Earnings don't cover the payout. Another negative is the PE, which is high at over 40.
For dedicated WWE fans, however, none of that may matter. For investors, though, this is a turnaround play. If interest in wresting picks up, results will improve and these shares will move higher.
International Speedway owns a collection of 13 “motorsports entertainment facilities.” In other words, it owns race tracks like Daytona International Speedway and Talladega Superspeedway. Its facilities host more than 100 races a year, with 90% of revenues coming from races sponsored by NASCAR.
Like WWE, International Speedway is a one-trick pony. So demand for racing is a key driver of performance. That's waned in recent years, hurting revenues and making the renewal of a lucrative broadcasting contract an increasingly concerning issue. The top-line peaked in 2007 at around $800 million and has fallen every year since, sitting at around $600 million last year.
Earnings have been more volatile on a year to year basis, but are less than half of their 2005 peak of around $3 a share. Margins have also collapsed, falling from the low- to mid-30s between 2003 and 2005 to the high teens and early twenties over the last three years.
The negatives now put out there, International Speedway is also part owner of Hollywood Casino at Kansas Speedway, one of its properties. Offering gambling at raceways is an interesting way to increase the value of what it offers both customers and investors. As more and more states look to gaming revenues to help boost state revenues, International Speedway could quickly turn its facilities into more than just race tracks.
Although this is a turnaround situation, too, the gaming angle could be the catalyst to higher prices. Watch NASCAR demand and gambling trends here. And the mid-20s PE is high, but not outlandish if margins recover.
Men, Who Invests in them?
It's hard to invest directly in the male entertainment market. WWE and International Speedway are two notable names in the space that are both out of favor right now. Turnaround investors might find them interesting, as should car and wrestling buffs. Broad based Disney shares, however, are probably a better long-term investment and let you say that you own a piece of ESPN. No one needs to know you also pal around with Minnie Mouse.
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Reuben Brewer has no position in any stocks mentioned. The Motley Fool recommends International Speedway and Walt Disney. The Motley Fool owns shares of International Speedway and Walt Disney. 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!