Rules of the Game

The weight of evidence approach refers to the use of a combination of data from several independent sources to establish sufficient rationale to make an investment decision. It is our belief that the following key rules can provide sufficient evidence of a tradable opportunity during the 2018 World Cup.

• Historical performance. Shares that did well during previous World Cups. While historical share price behaviour during past World Cup is not sufficient evidence on its own, it can support a broader argument in favour of identifying tradable opportunities.
• Technical analysis. Shares that follow a compelling trend, looking set to break out or with strong momentum, the World Cup providing that final nudge or extending existing momentum.
• Supportive forward outlook. Companies that have a healthy future profits guidance, upbeat broker comments and medium-term share target prices in line with investor goals.
• Commercial attractiveness. One of the most compelling factors that can help identify investment opportunities during the World Cup is the measure of how much certain companies can benefit from increased commercial activity surrounding the tournament.

Circle of Consumer Momentum

As consumers start watching the 2018 World Cup, they may come under the influence of increased marketing from both FIFA’s advertising partners (Adidas, Coca-Cola, Visa, etc) and other companies that make products for social events (i.e. food & beverages, entertainment, leisure or communications services).

Not only could these companies experience better trading conditions, but there may also be increased media focus, with the companies very much in the spotlight during the event. The World Cup can kick off the momentum, but this momentum has potential to become self-perpetuating.

People may consume more goods, driving up sales. The media could catch on the changed commercial environment, putting these companies under the microscope. Increased media attention has potential to drive up consumer interest, leading to better trading and creating a self-driving business circle during the World Cup.

The same could be true for the financial markets. As investors get exposed to increased media coverage of companies which could benefit from doing more business during the tournament, they could start bidding up the shares, creating a wave of technical momentum.

A smart trader that follows the principles of Momentum Investing by following emotional events, identifying waves of momentum and making short-term trades to capitalise, can use people’s emotional attachment to the World Cup to generate momentum leads. Continue reading as we discuss companies which are projected to benefit from this sporting euphoria.

Commercial Winners

Listed companies (those with tradeable shares) set to benefit commercially from positive World Cup momentum can be broken into several categories, based on the types of products/services they offer to UK consumers.

• Pubs, Restaurants & Breweries. Many will plan to watch evening and weekend matches in the company of friends, meeting in a pub or sports restaurant, which could boost business for JD Wetherspoon, Mitchells & Butlers, Greene King, Fuller Smith & Turner, Whitbread and Restaurant Group.
• Supermarkets and Food delivery. Many games take place during work hours, meaning that people may look to buy snacks and drinks for the office, which could help retailers like Tesco, Morrisons and Sainsbury’s, and food delivery companies like Just Eat, Ocado and Domino’s Pizza.
• Media and Telecommunications. While the World Cup is available to watch on terrestrial TV (benefiting ITV) rather than subscription (Sky), media companies could also benefit from increased consumer interest in football news. Thanks to 4G phone companies could benefit from larger than normal wireless data consumption as people stream games, helping telecoms like Vodafone, BT and TalkTalk.
• Sports betting. Shares in bookmakers like Paddy Power Betfair, GVC Holdings and William Hill could experience positive momentum thanks to a spike in interest in betting on football matches.
• Sports kit retailers. While manufacturers themselves (Nike, Adidas, UnderArmour, Puma and others) are not part of the UK Index , sports retailers like JD Sports Fashion and Sports Direct could see increased footfall from consumers looking to purchase new equipment and teamwear.
• Russia is a sprawling nation and, with matches taking place in 11 cities around the country, people will likely need to use air travel to reach the venues, with airlines potentially seeing increased June-July traffic statistics. While Ryanair doesn’t fly directly to Russia, many football fans may use the low-cost carrier to travel the initial leg of their journey to Russia. Meanwhile, British Airways flies directly to many of the venue cities, benefiting the bottom line of BA owner International Consolidated Airlines.

However, just as with historical price data, improved business environment is not the entire picture. As we have mentioned before, a smart trader will look for the weight of evidence, combining commercial attractiveness of stocks with other factors to drill down to the final selection of a suitable financial investment opportunity.

In the following section, we shall discuss 5 potentially attractive shares that combine multiple relevant traits and could be interesting for investors looking to benefit from the World Cup momentum.