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Play These 6 Sports Stocks and You Just May Win Big

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For investors aiming to swing for the fences with single equity plays, check out these sports-related names -- including Nike and Madison Square Garden Co.

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Adidas AG (OTCMKTS:ADDYY), which commands a 19% market share in athletic footwear sales, perennially finds itself playing second fiddle to Nike. Yet its approximately 50% stock price gain over the past 12 months leaves Big Brother from Beaverton far behind. The company's history dates back to bombed-out Bavaria in the late 1940s, but the German firm's future has rarely looked better. Brushing off the continent's debt crisis, Adidas recently received a huge boost from its enduring kit sponsorship of compatriot soccer club Bayern Munich, just anointed the world's most valuable sports team brand after capturing Europe's elite club title. Besides doing battle with Nike over an approximately $6 billion soccer market, Adidas also owns golf's TaylorMade, the equipment of choice for just-crowned US Open champion Justin Rose.

Its latest gross margin rose 2.4% year-over-year, to an all-time peak of 50.1%. Meanwhile, first-quarter net profit posted a 6% increase to 308 million euros, which CEO Herbert Hainer attributed to "the strong reception to our latest product innovations." Shares, which subsequently scored an analyst upgrade at JPMorgan, also offer investors a decent dividend yield of about 1.58%. Risks of owning its over-the-counter shares include a relative lack of liquidity for US investors. Systemic underperformance at Reebok, the brand it bought in 2006, is also an issue.

Storied British soccer side Manchester United PLC (NYSE:MANU), a/k/a the "Red Devils," is among the world's most valuable and famous sports organizations. Its rabid army of fans - among them ex-Goldman Sachs Group Inc (NYSE:GS) executive and "BRIC" coiner Jim O'Neill - ensures an enviably reliable revenue stream on its historic Old Trafford home turf, which is invariably packed to the stadium's 76,000 capacity. Shares, whose owners include George Soros, had their latest debut in August 2012, having first traded in 1991 before being taken private. The club won the last (as my loyalty is to its biggest rival, I prefer that word to "most recent") of its record 20 domestic championships in the season just ended, and such on-field success sent quarterly sponsorship revenue surging 52%. A blockbuster new English Premiership television deal will keep cash registers ringing at Manchester United mega stores from Bombay to Bangkok. Lucrative kit agreements lined up with blue chip clients like General Motors Company (NYSE:GM) also augur well.

That said, the stock has barely budged from its $14 IPO price even as the overall market soars. A dictatorial dual-class structure does not sit well with many shareholders. Last month's abrupt departure of managerial legend Alex Ferguson, at the helm since 1986, unnerved investors. All that on-field talent doesn't come cheap, with wages swallowing up fully 49% of all money earned in the fiscal third quarter. And it must gall a club that bills itself as the planet's biggest to see crosstown neighbor Manchester City, bankrolled by Arabian petrodollars, outspend it to capture many of the most coveted players. (As John Lennon once said, when asked if Ringo Starr was the best drummer in the world, "He's not even the best drummer in The Beatles.")

California's Callaway Golf Co (NYSE:ELY), founded in 1980 and best known for its Big Bertha clubs, has seen its shares gain almost 20% in the past 52 weeks. Its latest quarterly earnings received a boost from two new product lines, Versa putters and X Hot Woods. Domestic sales rose a solid 7%, and gross margin improved to 45.3% from 43.6%. Overall rounds played in this country have inched up encouragingly, with the economy now firmly out of the rough, but remain some 20% below their 1980s peak as increasingly arthritic baby boomers give up the game. Chronic complaints over slow play and a course glut left over from years of overbuilding are additional industry concerns. Callaway enjoyed a stellar recent run, but a subsequent ratings reduction due to market share erosion and competitor cost cuts saw shares subsequently act like a falling knife. (An age-old investment adage that one weekend duffer appears to have taken a little too literally.)

We'll end with a fun one. Purists will recoil at the unashamedly staged-managed histrionics of World Wrestling Entertainment, Inc. (NYSE:WWE) being bracketed with bona fide athletic pursuits. But synchronized swimming and rhythmic gymnastics are each Olympic sports, after all. And sneer at your own peril - WWE shares have surged some 30% since June 2012. (By comparison, Apple Inc. (NASDAQ:AAPL) has tumbled about 27% in the same timeframe.) Moreover, its dividend flirts with 5%, which is extremely impressive in our yield-starved age. To be sure, WWE's hamhanded acting bears little resemblance to its more authentic counterpart, a venerable combat form that dates to Greco-Roman times and is surely the only pastime on Earth capable of uniting those strangest of bedfellows -- the US, Russia, and Iran. Whereas real wrestling counts several financial industry power players among its aficionados, the nearest this faux version comes to a claim to fame on Wall Street is in having once employed Meredith Whitney's husband.

Yet shares stand at fresh peaks as we speak, propelled by a solid first quarter set of results. The recent 29th iteration of WrestleMania grossed a record $72 million. Television revenues also rose 15% on an annual basis, aided by an additional hour's airing of its Raw program. Issues to grapple with? Audience interest in the company's principal product is notoriously prone to boom and bust cycles, and a return to its Hulk Hogan and André the Giant glory days of the '80s appears unlikely. Weakness in international markets, a steep current stock multiple, and the McMahons' near total headlock on voting rights may also eventually have investors ordering a rematch.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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