Across the Pond, This Iconic Name Just Hit the Green Zone

Good afternoon. Ready for another incredible trend?

As promised, let’s look at one more way that TradeSmith aligns with market events to deliver clear signals.

Let’s cut through the noise once again this week.

This time, we’re talking about the world’s most popular sport as the global economy reopens and we witness one of the most seismic business events in sports history.

If you missed it, I have you covered. It happened in Europe.

A dozen of the continent’s top European football (soccer) franchises are breaking rank with their governing body. In an effort to capture more revenue for themselves and take greater control of their markets, these teams are banding together to create a so-called “Super League.”

The 12 clubs could shake up the future of sports leagues around the globe, shatter six decades of precedent and cooperation, and dramatically alter sports television and gaming sectors forever.

And TradeSmith’s tools are right on top of the development.

Imagine If You Will

To explain what’s happening, I’ll use a U.S. football analogy for the development taking place in Europe’s No. 1 sport.

The National Collegiate Athletic Association (NCAA) is the governing body of college sports.

The NCAA has an antitrust exemption that makes it a judge and jury for college athletics. This body oversees all of the different conferences and their member teams.

In college football, the Southeastern Conference (SEC), the Big Ten, and the Big 12 conferences generate an incredible amount of money for college football, and include powerhouse schools like Alabama, Florida, Ohio State, Michigan, Oklahoma, and Louisiana State University (LSU).

There are other, smaller conferences with very good teams. For example, the Atlantic Coast Conference (ACC) features Clemson, a perennial title favorite each year.

At the end of the year, the best four teams (regardless of conference) in the country face off in a four-team playoff. Ultimately, they anoint a national champion.

Well, imagine for a minute if the SEC, Big 10, and Big 12 decided they didn’t want to play in the College Football Playoff anymore.

What if the best teams in these conferences all got together and said they’re leaving the NCAA?

What if they announced plans to launch a Super Conference and have their own national title?

Not only would this new league decimate the NCAA’s legitimacy and crush its revenue streams, but it would also incentivize other groups to consider following suit.

That is very similar to what is happening in Europe with European football.

A Super League Enters the Conversation

Since 1955, European football has featured a major, international competition called the UEFA Champions League (UCL).

It has been a staple tournament that ensures that the best 32 teams across Europe play each year for a highly coveted title.

The Union of European Football Association (UEFA) has overseen this tournament of teams that finish in the top tiers of their national leagues each year.

But 12 of the top teams decided that they’ve had enough of UEFA and this tournament. We are witnessing the onset of a very public fight over money, competition, and television rights.

The UCL has no permanent members. Historically, any European club could qualify if they played well enough in their nation’s league or through play-in games.

But the new league would have a fixed roster of 15 teams. All of them are European powerhouse teams. In addition, there would be five teams that would rotate in and out each year, depending on to-be-determined rules.

Not only would this Super League upend decades of UCL dominance, but participating teams would also collect the incredible revenues generated by ticket sales and television. According to Forbes, the UCL generated $2.36 billion in media revenue in 2018–19 alone.

This could effectively bury UEFA as a governing body, as the UCL comprised 51% of its revenue that year.

Whether or not it’s good for the game remains to be seen. British Prime Minister Boris Johnson, whose nation is the home of the mighty English Premier League, has vowed to block the Super League’s launch.

UEFA could ban these teams from future UCL tournaments, and Fédération Internationale de Football Association (FIFA), the global governing football body, could even ban players on Super League teams from the World Cup.

This fight has only started. But if the teams do move forward, they are talking about a start in 2023–24.

This rebel collective of teams has already found sponsor support. JPMorgan Chase has reportedly offered a $4 billion commitment to get the league off the ground, according to The Guardian.

Now, the most important component of this news is the roster of teams. You might recognize a few. They include AC Milan, Arsenal, Atletico Madrid, Chelsea, FC Barcelona, Internationazale, Juventus, Liverpool, Manchester City, Real Madrid, and Tottenham Hotspur.

The one team left — the fourth-most-valuable club in the world — is one of the few sports teams that trade publicly on U.S. exchanges.

Its name: Manchester United

Hello There, Green Zone

You don’t need to be a sports fan to know the name Manchester United.

Valued at $4.2 billion, the English club has been a mainstay at the top of the English Premier League for decades.

The names Cristiano Ronaldo, David Beckham, Roy Keane, Wayne Rooney, Ryan Giggs, Paul Scholes, and Eric Cantona are as iconic as the Hall of Fame baseball players who wore single-digit uniforms for the New York Yankees.

Manchester United went public in August 2012, a surprise given the lack of public sports companies available on the market at the time. It turns out that they were a trendsetter.

A decade later, a few sports franchises are now public, including the New York Knicks and New York Rangers through Madison Square Garden Sports Corp. (MSGS), the Atlanta Braves through Liberty Braves Group (BATRK), and the Toronto Blue Jays through Rogers Communications (RCI).

In addition, valuations of sports franchises have exploded due to the popularity of sports streaming, the integration of fantasy sports, and the expected surge in interactive gambling. According to Forbes, NFL teams alone increased in value by 7% in 2020 despite the pandemic.

According to Statista, Manchester United’s valuation increased from $661 million in 2011 to $1.9 billion by 2018. It has retreated a bit, but the company’s valuation could quickly rebound in 2021 and beyond with news of this development.

When I saw the headlines about the Super League on Monday, I quickly looked up the ticker MANU.

MANU has bounced around for the last few months. Its VQ of 25.7% signals that it has a medium amount of risk within our system.

And it fell into the Yellow Zone back on March 25.

But wouldn’t you know it? Following this announcement, MANU bounced back into the Green Zone and aims to continue its uptrend momentum. This news could be a very significant catalyst for the European club.

Of course, there is risk that the idea gets shut down. But in the worst case, it appears that these mega-clubs are preparing for a battle to earn more revenue from their existing leagues. One can expect that UEFA and FIFA might look to cut a deal, and if they cannot, then this league would generate gobs of revenue for teams like Manchester United.

And given that TradeSmith aims to bring conviction to each trade, MANU signaled as a top opportunity in our Low Risk Runners and Kinetic VQ strategies.

In addition, MANU will also benefit from the reopening trend we’ve been talking about. Regardless of the Super League, fans will be back in the stands. And for British sports, fans will also be back in the pubs and other public places to watch the matches. The company remains one of the most recognizable sports brands in the world.

That likely isn’t going to change. And the opportunity for it to generate and keep more revenue through league innovation and partnerships drives my interest.

Let’s watch this to see if the uptrend continues.