14 nations, 22 Yards, More Than a Billion Hearts. Can Investors Capitalize on the Cricket World Cup?

Key Findings:

  • The short term returns of the winning country’s index have historically outperformed the broader benchmark after the Cricket World Cup Finals.
  • Returns of sponsors in the automotive industry outperformed their respective index following the 2011 World Cup.
  • Hyundai Motor Co. (KOSE:A005380) and Pepsico, Inc. (NYSE:PEP) are the sponsors with the best buy-to-hold broker estimates for the on-going  2015 World Cup.

The cricketing world is at fever pitch as the big guns battle it out for the coveted ICC 2015 Cricket World Cup. In this short report, we analyzed S&P Capital IQ’s stock and index data to look at three previous Cricket World Cup tournaments, and provide a quick snapshot of the observations between this sporting mega-event and stock markets performance. 

Table 1: Winner & Runner-Up Countries’ 3 Day Active Stock Market Performance after the Cricket World Cup Finals

Winner & Runner-Up Countries’ 3 Day Active Stock Market Performance after the Cricket World Cup Finals

     Source: S&P Capital IQ platform as of 17 March 2015 and Past            performance is not a guarantee of future results. Indices and Benchmarks: For India: Index (S&P BSE Sensex) and Benchmark (S&P Emerging BMI), Sri Lanka: Index (Sri Lanka CSE All Share Index) and Benchmark S&P Emerging BMI, Australia: Index (S&P/ASX 200 Index) and Benchmark (S&P Developed BMI).

When India beat Sri Lanka in the 2011 World Cup final, the S&P BSE Sensex outperformed the S&P Emerging BMI (representing companies domiciled in the emerging markets) by 0.47%. On the other hand, Sri Lanka’s domestic financial market, the Sri Lanka CSE All Share Index, underperformed the S&P Emerging BMI by -1.00%. Although not based on a statistical analysis, we have observed possible relationships between the winning country’s stock market outperformance after the Cricket World Cup finals on a short-term 1, 3, and 5 day basis following the last 3 World Cups. When we look at the 1, 3, 6 and 12 month active returns post-World Cup in a broader context, there is no set pattern seen for the winners, however on average the runners-up have underperformed their benchmark.


Historical Trends

According to the ICC, more than a fifth of the human population, or approximately 1 billion people, watch this third most popular sporting event in the world. Keeping in mind that the sponsors are expected to spend more than $238 million in the 2015 World Cup and that the benefits would be reaped over the longer term, we explored the historical stock performance of these major sponsor companies.

Using data available on the S&P Capital IQ platform, we examined sponsor returns from the 2011 and 2007 World Cups to see where and when sponsor equity returns outpaced the markets. Listed parent company was considered for the analysis if the sponsor was a private company. (We did not analyze 2003 World Cup sponsor data as sponsorship information was not transparent through public records and limited to few companies that were observable). In the analysis we looked at returns through the lens of both geography and industry with the aim of finding out 1) whether, when the World Cup is held in a specific region, sponsor companies headquartered nearby outperform, and 2) whether there are any particular sectors where better returns can be observed.

The 2011 World Cup was jointly hosted by India, Bangladesh and Sri Lanka. The six-month adjusted return of the major sponsors after the final match showed that the three Indian sponsors (there were no major sponsors from the other co-hosts) outperformed the S&P BSE 500 Index by 12.19% on average, surpassing the average returns of sponsors from three other countries, namely the United States, Germany and South Korea. The 2007 World Cup was held in the West Indies. There were no major sponsors headquartered in region but the country the closest geographically to the West Indies was the U.S.  The six-month market-adjusted return for the one U.S. sponsor (PepsiCo) was 6.37%. PepsiCo outperformed 7 of the 11 other sponsors during this timeframe.

From a sector perspective, the automotive industry led the way in terms of market outperformance in 2011.  Hero MotoCorp Ltd. (BSE:500182; formerly known as Hero Honda Motors Ltd.) outperformed the most, with a 35.62% gain over the S&P BSE 500 Index, followed by the automobile giant Hyundai Motor Co. (KOSE:A005380), which outperformed the Korea Stock Price 200 Index (^KS200) by 21.61%. In addition, the automotive lubricant manufacturing company Castrol India Ltd. (BSE:500870) also gained 22.23% over the S&P BSE 500. In 2007, one of the better performers was BMW which beat its benchmark by 0.70%. All returns are six-month market adjusted returns after the final match.  

Current Sponsors

Before the start of the 2015 World Cup, four of eight listed major sponsors had outperformed their regional benchmark in the week leading up to the event.  Reebok International Ltd.’s parent company, Adidas AG (DB:ADS) lead the way, outperforming the S&P Europe 350 by 2.55%, followed by MRF Ltd., beating the S&P BSE 500 by 2.43%. However, 15 days into the tournament, the stocks of these sponsors have, on average, underperformed their regional benchmark by -0.78%, a trend also witnessed in the 2011 World Cup.

Looking at the current sponsors of the 2015 World Cup, we analyzed S&P Capital IQ consensus broker estimates, to find out which companies have high recommendations from sell-side analysts. 

Table 2: Consensus Broker Ratings of the Major Sponsors of the ICC 2015 World Cup

Consensus Broker Ratings of the Major Sponsors of the ICC 2015 World Cup  

For illustrative purposes only.

Source: S&P Capital IQ platform as of 17 March 2015. Of our 9 World Cup partners considered for the analysis, 1Reebok International Limited’s listed ultimate parent Adidas AG (DB:ADS)

According to the S&P Capital IQ consensus broker buy/hold/sell, as of 17 March 2015, Hyundai Motor Co. (KOSE:A005380), an automotive company, has the best buy-to-sell ratio of 32:1 with a mean target price of $195.63 from 37 brokers. It will be interesting to see whether sponsors from the automotive industry continue to retain the top spot or whether a new industry will lead the way this time around.

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