CONTRIBUTORS
Greg McRae
Vice President- ETF Business Development
Global ETFs - Americas Distribution
Franklin Templeton
Today’s lesson is brought to you by the letters…
N, F, and L
The NFL playoffs are under way, and the regular season didn’t disappoint – unless you’re an Aaron Rodgers fan.
Through all of the tailgating and fist-bumping, football enthusiasts have been treated to unbelievable plays, spectacular failures, and all of the drama that feeds the NFL machine. Somehow – even Taylor Swift has managed to leave her mark, boosting Travis Kelce jersey sales by 400%, while NBC cheapened their broadcast with non-stop T-Swift cutaways.
As a fan of football and finance, I’ve found myself drawn to places where these passions intersect. The truth is, whether you’re a fan of football or not, anyone who’s a fan of money should be paying attention to the NFL.
In 2022, the league reached nearly 12 billion USD in revenue. And, on the Forbes list of The World’s 50 Most Valuable Sports Teams, the Dallas Cowboys lead with a 9 billion USD valuation, while NFL franchises hold 30 spots. By comparison, pro soccer teams – playing the world’s undisputed favourite game – occupy 7 spots.
With the NFL showcasing such staggering numbers – it begs the question:
What lessons can the NFL teach us about investing?
Lesson 1: Brand Equity
In the last 10 years, the Kansas City Chiefs are the winningest team in the NFL, despite what any New England Patriots fan might tell you. Yet, the Dallas Cowboys – who haven’t appeared in a Super Bowl since the 90s – are the most valuable sports franchise on the planet. How is it that a team which hasn’t won any hardware in two decades, is worth 5 billion USD more than today’s reigning champions? The answer is brand equity.
The 70s was a formative decade for modern Americana. It was also a time when the Cowboys were formidable, and the league was eager to grow its national presence.
The NFL made a concerted effort to brand the Cowboys as ‘America’s Team’, which elevated their cultural status. The NFL was able to bake the Dallas Cowboys into the American ethos right next to apple-pie and pick-up trucks – a standing which has persisted to this day. In countless surveys of America’s most beloved sports teams, the Cowboys consistently rank as the nation’s favourite, with a network of fans stretching across the country. It turns out, Cowboys football doesn’t matter as much as the Cowboys identity.
The Takeaway: Brand matters. That’s why X took an estimated 4 billion dollar punch in the face when they dropped the Twitter moniker. Franklin Templeton’s ETF brand is known for giving you access to attractively priced, high quality investment solutions, managed by world class experts.
Lesson 2: Diversification
Sticking with the Cowboys, after buying the team in the late 80s, owner Jerry Jones had the business acumen to leverage the team’s popularity in pursuit of more diverse business interests.
Jones expanded revenue streams, building and owning the team’s stadium and practice facilities, while making them year-round entertainment destinations. He also signed licensing and endorsement deals directly with various sponsors in order circumvent the NFL’s profit-sharing agreements. Then he created a hospitality business to plug into his football empire. While these things seem commonplace for today’s business moguls, Jones was ahead of his time.
The Takeaway: Whether you own the team or work the concessions, diversification is a wise strategy. A holistic portfolio of stocks, bonds, real estate, and alternatives can offer downside protection while improving long-term returns. Franklin Templeton’s wide range of active and passively managed ETFs give you the freedom to build a well-diversified portfolio for today’s eclectic markets.
Lesson 3: Active Management
Every NFL game is an experiment in active management. Strategic acumen plays a significant role, and it only takes a single miscalculation to unravel an entire season. Case in point – Super Bowl 49 between the Seattle Seahawks and the New England Patriots.
Down 4 points in the dying minutes of the game, the Seahawks authored an inspired drive to get themselves into ideal scoring position with seconds left on the clock. Armed with a hall-of-fame calibre Running Back in Marshawn Lynch, only 3-yards stood between Seattle and a championship winning touchdown. What proceeded next would go down in history as one of the most infamous in-game coaching decisions in all professional sports.
On 2nd and 3-yards to goal, Offensive Coordinator Pete Carroll called a shotgun play instead of running the ball. Quarterback Russell Wilson dropped deep into the pocket, took the snap, and the ball was thrown for an interception. The rest is history that Seahawks fans will never forget, for all the wrong reasons.
The Takeaway: Small decisions can have massive consequences in football and in your portfolio. It’s important that you choose a trusted asset manager with a proven track record of success.
Lesson 4: Value Investing
As a lifelong Cheese Head who got to witness Green Bay’s last Super Bowl win in person, it’s fitting that we point to their most recent playoff win for our final lesson.
Heading into wildcard weekend, nearly every analyst picked the Dallas Cowboys to beat the Packers. On the surface, it’s easy to understand why. The Packers are in the first year of a rebuild and are the youngest team to make the playoffs since 1977. But, those who knew the Packers well, knew that league pundits were underestimating them.
The Packers entered wildcard weekend riding a massive wave of momentum. They’d gone 6 and 2 in the final 8 weeks of the season, buoyed by exceptional play at quarterback. As the team that was supposed to lose, the Packers rode that momentum into Dallas on Sunday, and rolled right over the Cowboys. Did Packers fans know that they would win so convincingly? Of course not. Nothing is guaranteed in sports or investing. Did they know the team was more capable of winning than what oddsmakers and analysts suggested? Absolutely.
The Takeaway: Just like this year’s Packers, the market is home to stocks that are currently being underestimated. When added to a well-balanced portfolio, value stocks can truly supercharge returns. Even today’s ironclad mega-cap giants started as value plays.
Whatever you might feel about the NFL, the point of today’s exercise is to highlight how investors can benefit from studying what makes their favourite businesses successful. If it’s not the NFL, that’s okay. Just think of businesses you love and start there. The same things that work for them, might also work for your portfolio.
If you would like to talk about the NFL or ETFs, please don’t hesitate to reach out. You can also visit our ETF page for more info.
Enjoy the playoffs!
IMPORTANT LEGAL INFORMATION
Greg McRae’s comments, opinions and analyses are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. Because market and economic conditions are subject to rapid change, comments, opinion, and analyses are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy.
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