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.
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.
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.
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.