Transcript:CAROLINE WOODSWith the Super Bowl around the corner, most fans are focused on the score, but the real money in sports has always been in ownership. For decades, pro teams have been a store of value for billionaires. So how do you bring that playbook to your portfolio? Chris Marangi co-CIO of Value at Gabelli Funds, and he joins us now. Chris, thanks so much for being here.
CHRIS MARANGIDelighted to be here.
CAROLINE WOODSAll right. So you’ve called sports an anti eye trade. Explain what you mean. And why is now the time to invest in sports.
CHRIS MARANGIWell it’s all about experiences versus things for a certain generation. And I think that continues. Consumers are willing to spend money to go to theme parks, go to concerts, go to games. And so we’re trying to capture that. It’s an area of the economy that, it’s probably harder to duplicate with AI than, than others, although I certainly touched just about everything in the world.
CAROLINE WOODSSo you have an ETF goals, goals to make it easier to actually invest in sports. But before we get to that, let’s actually talk about how you define sports as far as your ETF is concerned.
CHRIS MARANGIYeah. So it’s Gabelli Opportunities and live in sports. So sports are a component of what we call live entertainment. The biggest of course. And so we’re primarily interested in the 30 or so teams in leagues that are publicly traded across the world. But we’re also involved in some of the ecosystem members that would include some of the venue owners, the ticketing companies, the data providers, as well as the media partners for, sports franchises.
CHRIS MARANGISo, you know, it’s a pretty broad universe all benefiting from the same underlying secular and cyclical trends.
CAROLINE WOODSSo why exclude gambling and gaming, since they’re clearly such a big part of the sports experience right now?
CHRIS MARANGIYeah, it’s an interesting question. You know, that’s, statutorily we can include those companies, but they are a little bit different and obviously immense change. In the gambling companies with, the advent of prediction markets. So we try to stay away from those. And, you know, I think when passport was passed and allowed gambling on sports, many years ago, you know, I think overall it was probably a net positive for teams in that it increased engagement.
CHRIS MARANGIYou know, viewers stick around to watch that last pitch even in a blowout. But, you know, there are still some open questions about how this impacts, sports long term.
CAROLINE WOODSOkay. So talk to us about the biggest growth drivers in sports right now. Is it streaming rights?
CHRIS MARANGIYeah. So meteorites certainly have always been the biggest, revenue driver or economic driver for sports. And there’s been a, of course, a very large, change in how meteorites are, sold, packaged. I mean, we’ve gone from, at one time radio to broadcast cable television, ESPN, and now to streamers, all the big streaming companies that it’s, Apple, Amazon, Netflix, Google are all involved in sports programing, and they’re going to continue to be involved.
CHRIS MARANGIAnd they’re probably the the winners of, of, sports, right. Contracts, going forward. So, that that is a actually a trend that we think is a positive overall for sports teams.
CAROLINE WOODSOkay. So break down some of your biggest holdings and goals then for us.
CHRIS MARANGIYeah. So we’ve got what I’d call our core four holdings. There are obviously more than that, but, it’s a Lana Braves baseball club, which used to be owned by Liberty Media, still effectively controlled by John Malone. Formula one, which, of course, is the, promoter of that racing, promotion. Also, involved with Liberty Media, Manchester United, of course, one of the most popular football or soccer teams globally, depending on where you’re from.
CHRIS MARANGIAnd then MSG sports, which owns the Knicks and the Rangers, one of those teams is doing quite well this year. The other is a work in process.
CAROLINE WOODSWell, we had some of the Knicks here on the floor of the stock exchange. The alums, I should say, with us not too long ago. How should investors be thinking about us versus international exposure? Do international leagues like Manchester United? You mentioned formula one offer better growth opportunities than some of the US leagues.
CHRIS MARANGIYeah, I mean, the US obviously is, more developed, but there’s a lot of growth overseas and in general, non-U.S. teams trade at lower multiples for sometimes, valid reasons. But, you know, obviously football is and basketball, I’ve made well known inroads, overseas. And I think that will continue. There’s been lots of talk about, actually establishing, an NBA Europe competitive league.
CHRIS MARANGIAnd, that should continue. I think you’ll also see a lot more teams come public, both in the US and internationally.
CAROLINE WOODSDig into that a bit more. How do you see the sports economy evolving over the same next 3 to 5 years?
CHRIS MARANGIYeah. So there’ve been some recent rule changes amongst the big four, leagues in the U.S, that has allowed, private equity, other institutions to participate in the growth of sports, and they’ve taken advantage. The owners have taken advantage of that and sold minority stakes to a number of different participants. And we think that continues and, should, both serve as value for them and actually create some opportunities to invest.
CHRIS MARANGIYou’ve also got some interesting sports assets hidden in other companies. So for example, one of the entities that we own is Rogers Communication, better known as the integrated telecommunications provider in Canada. But they also on the Toronto Blue Jays, the, Maple Leafs and the Raptors. And they have publicly discussed actually taking that franchise public. So that would be an even bigger opportunity for us.
CHRIS MARANGIYou’ve got Diageo, the, global dispute distilled spirits company, which owns a very popular cricket team. And some others like that where we’re trying to find those and, source those out, as opportunities for us to invest.
CAROLINE WOODSHow would this ETF fit into a broader portfolio aside from being an and I play is it a growth play a defensive hedge or is it just thematic allocation. How do you see it.
CHRIS MARANGIWell, yeah. You know, you think about the spectrum of assets that somebody can play. And, you know, I’ve got sort of gold on one side, not goals but gold. The metal, which generates no cash flow but has been a store of value for thousands of years. And then you’ve got what I would call just industrial metal benders at the other end.
CHRIS MARANGIYou don’t know what they make, but they generate consistent cash flow. I may not be a high multiple in sports, but it’s probably closer to the gold side. They have been stores of value. They’re scarce. I mean, see, there are occasional expansions. And there’s also certainly, an ego or vanity component that that underpins the value of sports franchises.
CHRIS MARANGIThose are it’s hard to replicate. But that certainly will continue as long as humans are in charge. And so, you know, we view them as, as, again, a store of value as something different, a diversifier, you know, I think, I think there’s a strong argument to be made that sports franchises are actually a separate asset class.
CAROLINE WOODSYeah, in a way, to own a piece of a professional sports team if you don’t have billions of dollars. But what would you say to skeptics who see sports as maybe too niche or too volatile for investing?
CHRIS MARANGIYeah, I wouldn’t say it’s too volatile. It is certainly niche. And it’s a category, that that needs to grow to make it more investable. But, you know, listen, if you, if you look at, how sports franchises have compounded over the last dozen or so years where we have some of the data they’ve compounded it, call it a mid-teens, rate that’s better than the S&P, which is a pretty high benchmark with a lot less volatility.
CHRIS MARANGISo, you know, you never guarantee, what happens in the future. But we don’t we see reasons for that to continue. And guess what. It’s fun to own a sports franchise.
CAROLINE WOODSJust finally what trends are you seeing that investors might not realize yet?
CHRIS MARANGIWell, you know, the, obviously the, one of the big questions we get is, well, broadcast television and cable media is is going away. What happens to these these franchises? And I think we do see the future. You know, as I mentioned earlier in the program, the big tech companies are already involved and there’s an opportunity for them, to increase the overall pool of revenue available to sports franchises.
CHRIS MARANGIThese are the anchor, an anchor product for all those future bundles. And so we see that we see, you know, continuing, preference for in-person events. That’s actual tickets sold. And who knows, maybe AI does happen, but there’ll be ways to monetize. These franchises which are so beloved by so many.
CAROLINE WOODSOkay, just finally, you mentioned the Atlanta Braves, you know, some more international exposure. So no clear football exposure here. Are you seeing any increase in flows because the Super Bowl is approaching and people, you know, you want to want to place their bets.
CHRIS MARANGIWell, we’ll see you next week. Certainly. You know, we launched this January 2nd, and I’ve seen a lot of, interest from both retail and surprisingly, to, to me, institutions and family offices. We’re all looking for ways to diversify their portfolios. It’s hard to own a basket of that. These 30 or so clubs, a lot of them are ordinary, stocks in foreign markets that you can’t own in your, in your brokerage.
CHRIS MARANGIAnd so that’s what this vehicle provides. It’s an easy way to get a diversified basket of exposure.
CAROLINE WOODSOkay. We’ll leave it there. Chris Marangi, co-CIO of Value at Gabelli Funds, thanks so much.
CHRIS MARANGIThanks for having me.