Buffett-Loving Fund Manager Sees Big Bets on WWE, ManU Paying Off

WWE and Manchester United share a common feature: One of their largest shareholders is a quiet English fund manager who loves beer and candy, and readily quotes Warren Buffett. The fund, Lindsell Train, has spent years building about a 20% stake in each business. Now both are up for sale, making them the two most hotly anticipated transactions in sports and entertainment.

With the fund already up more than $550 million on the two companies, the increasing value the broad market places on sports and entertainment could lead to even larger profits. Lindsell Train is a London-based asset manager formed in 2000 by Michael Lindsell and Nick Train. The company manages $27 billion in assets in a hedge fund, which is majority-owned by the duo with a London-traded closed-end fund owning most of the rest.

The pair also operate four mutual funds with another $13 billion in assets. The mutual funds invest much like the hedge fund, managed in a self-described 'languid' style that emphasizes patience over trading. 'Our investment strategy does not take into account such categories as ‘growth' or ‘value,' and we are generally indifferent to where companies generate their sales,' Train wrote in a 2019 note to investors.

'We are interested only in investing in what we analyze to be companies with exceptional brands or franchises.' Based on publicly disclosed fund holdings, Lindsell Train has long seen WWE as an exceptional franchise. With WWE believed to be pursuing a sale—controlling shareholder Vince McMahon returned to its board this month—that belief is being put to the test. Lindsell Train began building its stake in WWE in 2009 and continued adding to its holdings in most quarters since, seeming to double down most in periods when WWE stock fell.

Based on quarterly fund manager holding disclosures to the U.S. Securities & Exchange Commission and the average WWE share price in those periods, Lindsell Train has amassed 8.1 million shares at an average cost around $45 a share. With WWE recently trading around $88, the fund's stake is worth $715 million.

The fund already has cashed out $279 million in WWE shares in recent years, meaning it is sitting on a half-a-billion-dollar profit. At first blush, a scripted wrestling business may seem an unusual investment for a fund run by a zoology major (Lindsell earned the degree at Bristol) and a history buff (Train matriculated in history at Oxford). The company didn't respond to requests for comment, but it's easy to surmise WWE fits the parameters the duo states they seek in investments: businesses with predictable earnings, including through intellectual property, low capital spending and sustainably high return on capital.

The approach—echoing the preferences of Buffett and Fidelity's famed Peter Lynch, another investing legend they quote in their writings—draws Lindsell Train to easy-to-understand businesses riding macro trends, like sports. In 2017, the fund bought big into Manchester United, acquiring a 7.5 million share stake. It has since grown to nearly 11 million shares, worth $250 million today.

Like WWE, the controlling shareholders of ManU, the Glazer family, have announced they are considering strategic alternatives for the NYSE-traded club, including a possible sale. Lindsell Train's ManU investment isn't as profitable yet; at a recent share price of $22.80, the fund is up about $2 a share from the fund's estimated average share price, based on SEC disclosures. However, history shows the stock markets generally discount the value of sports teams.

If the Red Devils were to sell at their Sportico valuation of $5.95 billion, that would equal about $36.50 a share, or a gain of nearly $200 million on the fund's investment. Lindsell Train isn't a sports-focused investor, instead seeing sports teams as global brands on par with other holdings, such as candymaker Mondelez, luxury goods purveyor Burberry and wine and spirits maker Remy Cointreau. 'Burberry, Remy Cointreau and Manchester United,' Train wrote in another 2018 note.

'Is there a common denominator? How about all three being global, elite brands with a strong presence in Asia?' Based on regular commentaries to investors, Lindsell Train's specific thesis with sports isn't much different from other institutional investors in the space. The convergence of entertainment, sports and technology will create profitable opportunities in the future. But that doesn't mean every sports investment is paying off.

An 11% stake in Italian soccer club Juventus and a nearly 6% stake in Scottish soccer club Celtic PLC have been less fruitful; Juventus shares have fallen about 60% in the past five years, while Celtic shares haven't budged much in recent years. But as the managers have told investors, again citing Buffett, making money doesn't come from buying or selling, but holding. 'Audiences watching live sport are the most valuable of any out there as football is probably the most entertaining live sport in the world with the biggest backers,' Lindsell was quoted by FE Trustnet, an industry publication.

'So, creating wonderful football is worth a lot of money and far more than people are being remunerated for it today.'