Commissioner: Taking stock of the SEC West

Thursday, August 27, 2009 at 10:45pm

Most Americans, according to surveys, are part of the “investing class.” The proliferation of IRAs and 401(k) retirement accounts has created a large cohort of people who have a vested interest in following the stock market. But is this a good thing?

Frank Deford, one of the best sports writers in the business, once commented on how incongruous it was that in America it is legal to bet on stocks, about which most people know very little, but illegal to bet on sports, about which most people know quite a lot.

I sometimes imagine how it would be if college football teams were like publicly traded stocks, and the people who commented on them did so in the manner of financial analysts and stock-pickers. Here’s how I suppose the six stocks that comprise the SEC West stack up in the jargon of Wall Street:

The third and fourth quarters of 2009 are shaping up to be highly competitive for the companies comprising the SEC West Index [SEC-WX]. Louisiana State [LSU], which since 2001 has enjoyed its best earnings in odd-numbered years, has lost market share to Alabama [BAMA.] Both of these major companies can also expect significant competition from Ole Miss [REBS].

Arkansas [HAWGS] is still working to integrate a handful of new systems introduced by management, while new C-suite execs at Auburn [BARN] and Mississippi State [MSU-DOGS] are looking to turn earnings positive and emerge from Chapter 11.

Our current investment ratings for each of the companies in the SEC-WX, in their anticipated order of finishing following the holiday buying season, are:

Alabama: Strong Buy

Every well-managed portfolio should have a significant position in BAMA shares. Management is well aware of the company’s three-year, boom-bust cycle established by former CEOs Shula, Franchione and Dubose.

Analysts believe that current chief executive Nick Saban has the fundamentals in place that make such an occurrence a virtual impossibility in 2009. No other company in the index has a stronger brand identity or more committed customer base. For third straight year, customers turned out in record numbers for the spring showcase of new products.

Look for Alabama to compete with Florida [GATOR] for “Best In Class” in SEC Championship at Atlanta.

LSU: Hold

The Bayou Tiger still has a lot of growl and will present stiff challenges to all competitors during the regular buying season. Hosting Florida in Baton Rouge may be pivotal for the company’s chances to displace BAMA as the top performer in the index.

Erratic decision-making by CEO Les Myles continues to be the biggest drag on the company. Early-October meetings with Georgia [UGA] and Florida could create short-selling opportunities.

Ole Miss: Strong Buy

REBS is the best value stock in the index. CEO Houston Nutt has paid attention to recruiting and a marked improvement in talent is the reward for his efforts. Look for Ole Miss to field a much-improved product.

Finishing in the top spot on the index still remains a tall order for the company, but barring bad injury luck, REBS could challenge for No. 2 and/or be the team that puts a blemish on the record of the top finisher.

Arkansas: Buy

Investors who have no HAWGS ought to take a modest position in Arkansas as a hedge against disappointing performance by other companies that boast of a brighter earnings forecast. HAWGS has to deal with very poor schedule luck and must face both UGA and GATORS from the East Index. The contest with Georgia comes as the second game of the season and is the first of a six-game run that also includes Alabama, Florida, Ole Miss and Texas A&M.

The only bright spot in this stretch between Sept. 19 and Oct. 24 is the Oct. 10 contest with Auburn. Despite the challenges facing the HAWGS, second-year CEO Bobby Petrino will deliver a competitive product and the company will give a good account of itself in every competition.

Auburn: Sell

If you still have any of these shares in your portfolio, sell them now before trading is suspended amid rumors of an impending restatement of earnings.

Chaos on the Board at the end of 2008 resulted in the hasty and ill-considered replacement of long-term CEO Tommy Tuberville [career earnings 110-80] with the unspectacular Gene Chizik [career earnings 5-19].

“Tubs” had his detractors among his customer base, and since 2003 never enjoyed anything more than an uneasy truce with the board after directors clumsily tried to replace him. But the fact remains that where it counts, Tuberville produced better results on the Plains than any other CEO since “Shug” Jordan.

Mississippi State: Delisted

The MSU-DOGS directors made the decision to fire CEO Sylvester Croom and put the company into Chapter 11 at the end of 2008. It is highly doubtful that first-year CEO Dan Mullen will be able to return the company to profitability. More importantly, however, is the question whether the board of directors, and customer base, will accept the inevitable conclusion that their product appeals only to a niche market and adjust their expectations of profitability accordingly.

Croom brought integrity back to the company’s financial statements after the “creative accounting” of disgraced former CEO Jackie Sherrill. Meanwhile, Sherrill is pursuing litigation against investigators employed by the college football regulatory body claiming that they and the regulatory process they oversaw was corrupt. No doubt investors across the nation sympathize with Sherrill’s contentions. Even an imperfect messenger can make a valid claim.

‘The Commissioner’ is Nashville attorney Joseph ‘Woody’ Woodruff, a partner at Waller Lansden Dortch & Davis. Don’t agree with his views? Leave comments at www.nashvillecitypaper.com

4 Comments on this post:

By: Tiderguy on 8/28/09 at 3:22

What a dumb article. My four year old could have offered a deeper view. I consider myself an Alabama fan but that may be the most biased and boring article I have read all season. How in the world could you be called the Commissioner? You think because you are a lawyer that you are worthy of such a name. Did you ever play football? You my friend have too much time on your hands. Go SEC and we all have problems. If it isn't the off the field problems with Julio it is the fights and arrests at the other schools. Let's not jinx oursleves friend and try not to drink too much Kool Aid. Roll Tide Roll though!

By: Tiderguy on 8/28/09 at 3:54

Another thought...how about comparing football teams to vegetables next time and Miss State can be an onion? That would make for some interesting reading.

By: bugler70 on 8/29/09 at 3:14

I thought it was a clever article.

By: spike on 8/30/09 at 3:02

Tiderguy - what a great idea. Since you have enough time to bother writing negative comments, I'm sure you have enough time on your hands to debate which team can be an asparagus and which should be a carrot. With such a hot head, you can be the Head Habanero.

I personally find the stock analogy interesting... and faced with the current economy, wish I could invest in a decent SEC football team rather than the other, quite unsavory options that are pulling down the market. :)