Everyone knows that sports is big business – try a market forecast to be valued at $626 billion in 2023. That's up from $471 billion just three years ago.
Until recently, however, investing directly in the fan side of sports confined investors to limited options. Sure, an investor could buy shares in the Green Bay Packers, but that's not a stock in the traditional sense. Nor is it liquid or offering much upside potential. And there was once public equity available in the Boston Celtics.
Fortunately for sports-loving investors, the universe of publicly traded sports plays is expanding and including more traditional fare. The newly minted Roundhill MVP ETF (MVP) taps into that theme.
MVP debuted last month and owing to that rookie status, it's worth nothing this fund is not similar to the Roundhill Sports Betting & iGaming ETF (BETZ). As has been widely noted, BETZ – the first and only sports wagering exchange traded fund – is an icon among thematic ETFs. BETZ and MVP are stablemates, but there is scant overlap between the two funds.
Mulling MVP's Merits
Obviously, MVP itself is a thematic ETF and one that addresses a nuanced concept: the business of sports is growing and there's an element of scarcity that MVP taps into.
“Sports franchises are scarce, premium assets. From 2011 to 2020, the average franchise across the NFL, NBA, NHL, MLB, and Premier League increased in value by over 500%,” according to Roundhill research.
To put that into terms fans and investors alike can easily understand, every NFL franchise is worth at least $2 billion, meaning each would qualify for entry into many small-cap ETFs. Several are so valuable that they'd be mid-cap stocks.
Those are nifty anecdotes, but the case for MVP is enhanced via its media exposure. Not only does that diversify the fund away from positions in individual teams, it allows investors to participate in one of the most lucrative elements of the sports equations, because media rights are a big reason NFL franchises are so valuable. The league recently signed deals with media partners Amazon, CBS, ESPN/ABC, FOX and NBC reportedly worth $100 billion combined.
Additionally, local deals drive valuations higher for large market teams in other sports. Think the NBA's Los Angeles Lakers and Major League Baseball's New York Yankees, among others.
“Estimates from Rethink Research suggest the rise in streaming will drive global revenue from sports media rights to $85 billion by 2025, a 75% compared to 2018,” notes Roundhill.
On the media note, it provides MVP with some backdoor sports betting exposure because analysts see the intersection of media, iGaming and sports wagering generating $30 billion of revenue by 2030.
MVP Portfolio Appropriateness
If the history of new ETFs teaches market observers anything it's that these products often draw initial critics and many of these funds often silence those naysayers.
It's too early in MVP's lifespan to know if that will be case. However, this isn't an exceedingly risky fund chock full of anonymous small caps. Rather, almost 72% of the fund's roster is split between large- and mid-cap stocks, many of which are familiar names, such as Nike (NKE).
The audience for MVP is potentially broad as it can be avenue for growth-oriented investors, a play for risk-tolerant investors or an option for investors seeking a refreshed approach to consumer cyclical and media stocks.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.