The World Series might end tonight if the Boston Red Sox can wrap this up. My brother sent me this really cool Bloomberg business valuation article. It seems that Bloomberg is going head to head with Forbes on this sport business valuation. Here’s is the link to the full article.
Here are the notes, according to data compiled by Bloomberg:
The average value of a Major League Baseball team is $1 billion, more than 35 percent higher than previous estimates.
The New York Yankees are worth $3.3 billion, making them the sport’s most-valuable enterprise. The Los Angeles Dodgers rank second with a value of $2.1 billion.
According to Anthony Di Santi, the managing director of the sports finance advisory division of New York-based Citigroup Inc.’s private bank, “Major League Baseball is catching up to valuations of the National Football League It’s because they’ve been exploiting the media opportunities that are available to them on a national level.” He said regional sports networks also play a role when valuing teams.
Ten teams are worth more than $1 billion. The Boston Red Sox and New York Mets each are valued at more than $2 billion, the data shows.
The amount shared between the large market teams with the smaller market teams was about $360 million in 2012. Those with lower revenues receive bigger amounts from the fund.
Baseball teams are valued based on multiples of revenue, not operating income, according to Gerald Cardinale, managing partner of private equity firm RedBird Capital Partners and a co-founding investor of the YES Network. He said enterprise value, defined as market capitalization plus total debt minus cash, is the best way to quote team transactions.
The Steinbrenner family owns 55 percent of Yankee Global, according to a 2010 NBC New York report published after George Steinbrenner’s death.
Bob Rose, the public relations director for the Oakland Athletics, said Bloomberg’s $590 million valuation of the team was low. The franchise had revenue of $175 million in 2012.“If hypothetically we were to sell, it would be more like four times $175 million, or $700 million,” Rose said in an e-mail.
Group Jean Coutu – An Opportunity For the Patient Investor
Note: Dollar amounts are in Canadian $ unless mentioned otherwise. USD-CAD 1.0295 Price of 1 USD in CAD
Jean Coutu Group PJC Inc. (PJC.A, OTC:JCOUF) is Canada’s 2nd largest publicly traded drug store retailer with a market cap of about ~$4.1 billion and 411 locations. Their stores are located in metropolitan areas, mid-sized cities and small towns across Eastern Canada. PJC is also the second-best performing pharmacy stock in North-America in the last three years, up 122%, behind Rite Aid’s 232% gain. However, these nice stats don’t make PJC a hot bandwagon stock. It’s actually quite the opposite. The following opportunity is appropriate for the investor with a time horizon of over five years, a rarity in today’s hyperactive environment. If you are the type of investor that looks up the stock price every five minutes don’t invest in PJC. Unfortunately, PJC’s stock price doesn’t bounce around on random Tweets.
My approach to this valuation is similar to the one I would take if I would be buying a private enterprise. PJC has the characteristics of what I’m looking for: a good old cash rich drug store retailer with solid stable free cash flow, no debt, modest growth, heavy insider ownership, long-term potential, and that provides goods and service essential to the community. In today’s investing environment, PJC would classify under the boring investment tab. It’s the good old buy and hold. For the rest of the article click here.
Facebook’s (FB) stock price has finally soared past its initial IPO target. Facebook is currently trading at ~$50 which is good enough for a monster one year return of 130%. The stock has been on a tear and everybody is merry. Basically, I’m here to suggest that if you made money holding your Facebook shares, good for you and cash out while it’s hot. Why? It’s all about the valuation, not Facebook. Facebook is great company. The valuation is not. Sometimes we confuse the two.
What do the IPOs of Facebook, Zynga (ZNGA), and Groupon (GRPN) all have in common? They all had excessive initial valuation. With the Twitter (TWTR) IPO coming soon, we can already hear Wall-Street marketing drums going to work. Goldman Sachs, the lead underwriter, will be pricing the company for the offering, not valuing it. A stock has a price and a value. Very often they are not in sync with each other. Like the companies mentioned above, Twitter is a nice successful story but its valuation is out of whack.
First, this article will briefly review the factors that lead to an over valuation of Facebook. Second, with the Twitter IPO coming soon, I want to point out the lessons learned from these IPO flops.
Below is a very interesting 55 minute question and answer with Bill Gates done by Harvard. Bill addresses his beginning at Microsoft, Apple, Steve Jobs, his relation with Warren Buffett, and his foundation. Probably the closing thing to spending an hour with a billionaire.
Forty years ago OPEC halted all their oil exports to the U.S. This was OPEC’s response to America’s support for Israel during the Yom Kippur War. I wasn’t around at that time but I have heard about these dark moments. As we know America is extremely dependent on oil, aka: the blood of the economy, even more so back then when it was extremely cheap and there wasn’t such things as “alternative energy, clean energy, energy efficient, or green energy”. Oil, that’s it. It was everywhere, affordable, and accessible. That was also a very depressing era because America was getting their butt kicked in Vietnam and it was now brought down to its knees by a couple Arab Sheiks. It looked like the end for the almighty America. But as we now know, America did what it does best, it got their act together, got up and became stronger. America has learned from this grim experience. It’s now a more energy efficient, more environmentally friendly and less dependent on foreign oil, especially from dictators with links to terrorism.
In January 1974 oil prices were 4 times higher than before the crisis. Could we handle that today? If the price at the pump quadruple tomorrow morning, I would be biking, walking, running everywhere if that was ever to happen. We complained a lot about gas prices, but at least we have oil to run our cars around. However, we really need to find an alternative to this dirty filthy stuff.
I have uploaded a few pictures from the crisis from forty years ago, courtesy of the Business Insider. Click on on the Business Insider link for the full collection.
Recently Dollarama, DOL or DLMAF.PK, has hit the lower range of my valuation target. On June 3rd 2013, I published a valuation report on DOL, Dollarama – A Stock That Generates Dollars. My research concluded that the implied intrinsic value of Dollarama is in the range of $6 to $6.6 billion, or $84.7 to $93.7 per share. As of September 30th 2013, DOL was trading at ~$84 with a market cap of $5.9 billion. I admit that the target price was hit much earlier than I anticipated. When I wrote the valuation report, DOL was trading at ~$72 a share and is now up 16% since. That’s pretty spectacular and blitz runs like that don’t come too often. Then again, if you read my research report, you would know that my assumptions were on the conservative side to minimize the downside risk. So I have tamed down management and analysts’ expectations.
Now that the stock is trading at record high, what should you do? Where do we go now? Should investors be buying more, trimming their position, something in the middle, or nothing? The point of the article is to provide an update on my valuation thesis. For the full valuation calculation report, I will refer you to the link above.