|Minyanville.com, Summer, 2012. This article was written with Oliver Pursche, of Gary Goldberg Financial Service. It was part of a series of articles developed under an agreement with minyanville.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week.|
When I look at the interlocking circles of the Olympics, I don’t really see circles. I see interlocking dollar signs.
With an audience of nearly 4 billion people in 225 countries, the Olympics are a marketer’s dream come true for truly global companies like Visa (V), UPS (UPS), BP (BP), McDonald’s (MCD), Live Nation (LYV), and General Mills (GIS), among others. For this reason, I was attracted to the Olympic Hopefuls motif, offered by Motif Investing.
I’ve written about Motif Investing and its so-called motifs before. These motifs are simply indexes that investors can adjust based on their own knowledge and ideas. Investment motifs are a bit more intuitive than their index brethren. While investors can buy, say, the PowerShares Dynamic Food & Beverage ETF (PBJ) and take what they get, in the motif world, they can buy Caffeine Fix, consisting of soda, coffee, energy drink, and tea companies and — if they want — change the weighting of sectors or specific companies.
I might offer parenthetically that I have no ax to grind when talking about motifs, as investors buy them directly. I can’t sell them, but nonetheless I strongly believe that they offer investors a powerful tool that is not to be ignored.
All that being said, the Olympic Hopefuls motif is one of the least popular with investors at the moment. Right now, the trending motifs — measured by community chatter, buying, and viewing — are Biotech Breakthroughs (with a one-year return of 40.8%), Digital Dollars (payment processing companies with a one-year return of 30.2%), and Healthy & Tasty (healthy food that actually tastes good, sold by the likes of Whole Foods (WFM), Chipotle (CMG), and Annie’s (BNNY), with a one-year return of 26.5%).
The Olympic torch, it appears, just isn’t burning that brightly among investors. Here’s one reason: The historical one-year return on Olympic Hopefuls is -4.2% while the S&P 500 returned almost 8%. The notion that past performance does not guarantee future results is often used in cautionary remarks by investment professionals. However, it swings both ways.
A negative historical performance does not preclude future success. The bull case for the Olympic Hopefuls, and one I can get behind, is that marketing to nearly 4 billion people, in a thoughtful, tactical, and careful way, can put a tailwind behind sales, and ultimately earnings. I feel that it’s important to keep in mind that marketing expenditures take time to germinate — but if done correctly, there could be a long tail to the lift revenues and earnings.
Remember, the most decorated Olympian ever, Michael Phelps, may have less swimming ahead of him than behind him, but his career in endorsements is just beginning. And the gold-winning women’s gymnastic team, with an average age of 16 — well, who knows just how quickly General Mills will feature them on a box of Wheaties? [Editor’s note: US gymnast Gabby Douglas is already featured on Kellogg’s Corn Flakes cereal.]