What if the SEC football landscape were a stock index? How would the fourteen programs stack up?
Some teams would be outstanding performers, like Apple has been over the past few years. Others would be penny stock trash, much like the famous implosion of Pets.com. Stock analysts examine current market conditions, management teams, and future prospects when picking stocks. Let’s examine the market landscape and see which programs are worthy of our viewing investment.
Strong Buy:
Alabama. Anyone who has ever seen an ad for a mutual fund knows that past performance is no guarantee of future results. Does Alabama’s recent run of stellar performance mean the program is due for a reversion to the mean? The program has a top flight CEO in Nick Saban, and has developed a bench of management talent behind him. Saban’s process-oriented approach means the Tide can rely on it’s core competencies of defense and ball control, and not have to rely on accounting tricks to meet the quarterly numbers (for examples of such financial chicanery see Auburn University and Newton, Cam). The next few quarters could prove challenging, as Alabama must replace several key executives who left the company to launch venture capital funds in the NFL. Any dips should be bought aggressively however, and Alabama should be a core holding.
LSU. The program in Baton Rouge has paid solid dividends over the past several years, and LSU has a robust pipeline that should continue to yield results for investors. CEO Les Miles can be brilliant yet erratic, and has made some questionable hiring decisions at the Chief Operating Officer/Quarterback position in the past which has limited the program’s upside. HR seems to have gotten the latest hire right however, and new QB Zack Mettenberger should be an immediate upgrade, provided he can adhere to the morality clause in his employment agreement. The defense division of the organization remains the stalwart though, and as long as the employees can pass their drug tests the LSU program should continue to be one of the top performers in the market.
Market Outperform (Weaselly techno-speak for teams that will probably win slightly more than they lose):
Georgia. The program in Athens should for all practical reasons be a top stock year in and year out, but the execution of corporate strategy has fallen dramatically short of expectations. Georgia is the Cisco Systems of the SEC: they have the infrastructure in place to exceed expectations, but disappoint investors year in and year out. It should be noted that CEO Mark Richt has added the title of Good Christian Man to his responsibilities, so it remains to be seen whether he can handle the dual roles. The Georgia program is more suitable for short-term traders than long-term investors due to the short-term unpredictability of results.
South Carolina. Chairman Spurrier has guided the program to its best-ever year recently. While we expect the upcoming year to be another strong one, there are headwinds. Corporate strategy is susceptible to imitation, and competition in the space remains fierce, putting pressure on victory margins. While the program’s core competency of shirtless consumption of Coors Banquet Beer has paid dividends in the past, we fear that we are at the point of diminishing returns.
Florida. Replacing a star chief executive is never an easy task, especially when the successor comes from outside the organization. The lack of a succession plan by former CEO Meyer has hurt Florida shareholders in recent years, and new exec Will Muschamp is rebuilding a program that should be running on all cylinders. The Gator program has many built-in advantages, creating the wide moat that investors such as Warren Buffet look for. The downtrend should prove to be temporary, and we view current price levels as an attractive buying opportunities. Looking downstream, as the Florida program recovers, jean shorts manufacturers also look attractive.
Speculative Buy:
Vanderbilt. Longtime underperformer Vanderbilt has shown recent upticks in growth potential. Investors should be wary of committing too much capital in chasing last year’s performance however, since career academics rarely translate into effective operators and managers. For small speculative positions with discretionary funds though, the next year or two could prove fruitful before CEO James Franklin is lured away by a bigger organization.
Neutral:
Arkansas. Much like the dreaded “accounting irregularities” have sunk many organizations, the Arkansas program is facing numerous legal and regulatory challenges. The ugly ouster of Chairman Bobby Petrino is reminiscent of similar scandals at Boeing and Best Buy, where the chief executives had inappropriate relationships with subordinates. Shareholders are the ones who typically suffer in these situations. There are simply too many questions about the Arkansas program currently to perform a proper analysis. Investors who insist on playing in the space should look at regional small cap offerings such as auto/motorcycle parts stores and stun gun manufacturers.
Texas A&M. Moving from the mid-cap space of the Big 12 to the large-cap SEC will be a daunting challenge for the Aggie program. If A&M had traditionally been atop the mid-cap indices in performance, we would have more confidence in the transition. Breaking in a new CEO in year one in the SEC should provide further headwinds. Too many risks – both internal and external – are currently present to recommend an investment. The massive little brother complex possessed by the A&M program should lead to high correlation with index mate Auburn, causing ripe conditions for a pairs trade.
Missouri. The other new addition to the index operates an offensive strategy that experienced some successful years in the competitive landscape; however recent years have seen competitors render the spread initiative ineffective. The Missouri program is largely an unknown since the analyst community that covers the SEC does not follow penny stocks.
Market Underperform (More weaselly investment speak for crappy stocks that the analyst doesn’t have the guts to put a Sell rating on):
Auburn. After the shock of leading the SEC index in 2010, the Auburn program regressed to the mean in 2011. Strategic planning was nonexistent, and execution of business processes was so pathetic that the 10-K report was accompanied by a Sarah McLachlan soundtrack. As is the norm with the Auburn program, legal and regulatory issues are of constant concern. While CEO Chizik experienced lighting-in-a bottle success, he remains a suspect hire with a thin resume, and we are doubtful he can sink his teeth in the program’s glaring issues. We also remain doubtful of the existence of said teeth.
Mississippi State. The burden of expectations has proven to be too much for the Bulldog program as of late, and shares look to still be slightly overvalued. The noise and environmental restrictions imposed by regulators continue to be a distraction on what CEO Dan Mullen refers to as Project Cowbell. The unfortunate location for company headquarters continues to be a hindrance to acquiring top tier talent, which puts the MSU program at a competitive disadvantage. Shares are to be avoided.
Sell:
Ole Miss
Kentucky
Tennessee
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