Quality May or May Not Come at a Price

[BrahimHemdani 1]

I thought you guys might be interested in this piece from a Henderson Global Investors email that I received in my office today.

 

Quality may or may not come at a price

 

As global economic uncertainty continues even professional football is under pressure to reign in its spending. Last year the UK transfer fee was broken twice in a matter of hours; however this yearâ??s transfer window looks to be an austere one. Football clubs are under pressure on two fronts. Firstly like any other company they must be profitable. Secondly, the new Financial Fair Play rules will require clubs to operate on a sustainable basis. As a result clubs are finding it increasingly difficult to justify grand, marquee signings. The disappointing performance of record-breaking signings last year such as Fernando Torres to Chelsea at £50m and Andy Carroll to Liverpool for £35m are two cases in point.

 

Some clubs are now looking to buy talented players that do not require a large investment â?? for that is what buying a player is. These players should in theory perform as well as a more expensive player where the manager is able to identify a star of the future. In this respect, football managers are stock-picking like fund managers. However, it is also true that looking at the league tables, the more a manager spends on players the greater the likelihood of success.

 

The current environment is presenting buying opportunities at what appears to be attractive prices. But a loan signing from Chelsea, or a property company trading at a 50% discount to book value that appears to be cheap does not necessarily translate into good value. Although price is an important consideration, investors will do better to focus on the quality of the investment. Football managers, like investors should consider more carefully what they are really investing in.

[craig 5,199]

My current investment vehicle of choice is CFD's. Doing not too badly either, up 20% since last September.