SPC Premium Dossier: Companies in This "Micro Sector" Averaged a 312% Gain Over the Last Decade
And the "Buffett + Buyouts Effect" ...
Editor’s Note: This Dossier is a part of the coverage of companies and assets that are in the SPC Premium Model Portfolio. You can learn more about becoming an SPC Premium member by clicking here to unlock this full report.
I grew up in a Pittsburgh suburb called Murrysville.
And that made me a Pittsburgh sports fan … of the die-hard variety. Pirates baseball … Steelers football … and Penguins hockey.
In addition to pilot Jimmy Doolittle – and, yes, my Dad – my heroes included Pirates slugger Willie Stargell and cannon-armed batting champ Roberto Clemente.
I lived and died with the Battling Bucs and their wins and losses. The team won the ‘71 World Series against a Baltimore Orioles team whose pitching staff boasted four (that’s right … four) 20-game winners. And Clemente — known as “The Great One” in Pittsburgh — used that world stage to show why: He hit .414 and won the series MVP.
Late the next year, as Stargell slugged and Clemente hit and the team powered its way to another postseason, I listened on our Ford station wagon’s car radio — and felt the exultation — as Roberto got his 3,000th (and final) career hit. I was crushed when reliever Bob Moose uncorked the wild pitch that ended the Pirates’ 1972 National League playoff series against the Cincinnati Reds. And I was gutted that New Year’s morning (Jan. 1, 1973) when I discovered that Clemente – on a humanitarian mission to help earthquake victims in Nicaragua – had been killed in a plane crash.
Then came the Fall of 1973 … and I was gutted again.
My Dad got transferred to Baltimore – meaning we had to move south of the Mason-Dixon Line … to the home market of the Baltimore Orioles.
The Pirates were still my No. 1 team. And always will be.
But I learned to dig the O’s. The Hoover-vacuum glove of third baseman Brooks Robinson. The graceful delivery of Cy Young winner Jim Palmer (who, in 4,000 innings, never surrendered a grand slam). And, later, the Ironman resolve of Cal Ripken Jr.
I’ve attended scores of Orioles games – first at Memorial Stadium and, since 1992, at Camden Yards. And I loved both stadiums.
I’m sharing this bit of “Bill History” for a reason …
In January 2024, as my investing team and I started work on this SPC Premium Dossier, an investment group headed by former Carlyle Group Inc. co-founder David Rubenstein announced a $1.725 billion deal to buy the Orioles.
The way the bargain was structured, Team Rubenstein spent $690 million for 40% of the O’s – immediately. The buyers would hand over the remaining $1.035 billion (for the remaining 60%) upon the death of longtime Orioles’ owner Peter Angelos.
Turns out, that scenario played out sooner than expected. In March, when Angelos died at 94 years of age, the new ownership group, headed by billionaire Rubenstein, became the new face of the Baltimore franchise.
It was a fascinating development – for a bunch of reasons.
First, I know the Carlyle Group, a global private-equity group once headed by Frank Carlucci, the U.S. defense secretary during the Reagan Administration. Carlyle did a couple of transactions involving companies I once covered back during my journalism days. So Carlyle and I have crossed paths before.
And that bit of déjà vu made this Orioles deal kinda cool.
Second, Rubenstein is a Baltimore guy, who genuinely loves the Birds. On opening day, he was at Camden Yards meeting fans. He joined now-announcer Jim Palmer & Co. for a spell in the broadcast booth, shared some tales from his financier days and displayed some impressive knowledge about Orioles history.
Third, this entire affair was a first-class reminder of a similar opportunity for our SPC Model Portfolio – an opportunity based on the precept that sports franchises are a rare financial asset.
If you’re creating a roster of pro sports teams at the top level, there are 30 in Major League Baseball, 32 in the National Football League, 32 in the National Hockey League and 30 in the National Basketball Association.
There are minor-league teams, as well.
But you get the key idea here: With pro sports teams, you’re essentially talking about a “Micro Sector.”
The list of sports franchises is incredibly short. Almost all are privately held. Some teams stay in family hands for decades. (My Pittsburgh Steelers, for instance, have been owned by the Rooney family since 1933.)
So they don’t change hands very often.
You can’t predict when they’ll be put up for sale.
And when these deals do get done … ownership usually transfers from one high-roller to another … meaning there’s virtually no way to get a piece for yourself.
And that’s a total drag, since pro sports teams march higher and higher in value.
Let’s stick with our Orioles example. When I started following the team in 1974, it was owned by National Brewing Co. Chairman Jerold (Jerry) Hoffberger.
In 1979, he sold the O’s to longtime friend (and Washington lawyer) Edward Bennett Williams – for $12.3 million.
In December 1988, the team was sold (for $70 million) to New York financier Eli Jacobs. When a forced bankruptcy pushed Jacobs to sell the team in August 1993, the Orioles baseball club went to an investor group headed by Peter Angelos, who was then a U.S. trial lawyer. The price: $173 million.
Here’s a quick review of the O’s sales prices over the last four-and-a-half decades:
1979: $12.3 million.
1988: $70 million.
1993: $173 million.
2024: $1.725 billion.
I can hear what you’re thinking: “Pretty cool stuff, Bill, but why is this important to me? What does it mean for my money?”
A fair question. And I’ll answer by saying, as far as your money goes, it means a lot.
Because I see opportunity here.
There’s a sports franchise that’ll be going on the auction block at some point. Maybe later than sooner – but at some point.
And we’re talking about a championship team. With superb management. A great “brand.” A storied history. An ardent fan base. And, as a “kicker” – a showcase property portfolio that comes with it.
This franchise is publicly traded – meaning you can get a piece for yourself. You’ll even be “partners” with “Oracle of Omaha” Warren Buffett. And you can be certain that, whatever the team is valued at right now, when deal time rolls around … it’ll sell for more – and probably a lot more.