Previous Tournaments

What is the optimal way to identify stocks that traditionally do well during the World Cup and can reasonably be expected to offer tradable opportunities during the 2018 World Cup in Russia? While looking purely at historical share price data can be tempting, it is not necessarily the best way.

• Past performance is not indicative of future results. While certain stocks may have done well during past tournaments, there is no guarantee that this performance will be repeated.
• Correlation does not imply causation. Stock markets are complex environments where stock price moves can be influenced by tens or even hundreds of drivers, including corporate earnings, macroeconomic indicators, state of global economy, geopolitical news or legal proceedings.
• Weight of evidence. To properly identify an investment opportunity, a smart trader would look for a “weight of evidence”, a compelling combination of factors that all point toward a certain stock.

To demonstrate the pitfalls of relying exclusively on historical price data for picking stocks, let’s look at a chart of the top 10 Sector performers during the past six FIFA World Cups (1994 through 2014).

While Metals & Mining appears to be best performer during past World Cups, there is no weight of evidence (such as consumer spending patterns) that ties the sector to the World Cup. This means that while trading Mining shares could be profitable on its own during the competition, there is no compelling reason to suggest that the World Cup, as an event, contributes directly to the sector’s share price momentum.

Similar observations can be made when looking at individual stocks, with Mining and Utilities shares dominating the Top 25 best performer list by average gains.

Precious metals miners such as Fresnillo or Randgold Resources may have done well on the stock market during previous FIFA World Cups, yet their 2018 year-to-date share price performance is negative. And there is no additional weight of evidence to suggest that these shares will get a positive boost from the sporting event.

So, what constitutes a “weight of evidence”? Which factors will need to work in unison for a stock to benefit from the positive momentum generated during the 2018 World Cup?

We have identified the following key rules for selecting suitable shares that have the potential to do well during this year’s premier sporting event. Continue reading the report to find out more about the selection criteria as well as analysis of a group of 5 companies which could benefit.