The JohnWallStreet Sports Stock Index (JSSI) was created to serve as a measuring stick for the growth—or lack thereof—of the greater domestic sports business. After much deliberation, we’ve decided to narrow the index’s focus to the business of professional sports. The change required we rebalance the portfolio. Gone are companies like Lululemon, Vail Resorts and Peloton Interactive. In their place, are names like RedBall Acquisition Corp, Hall of Fame Resort & Entertainment and theScore. The 40 tickers selected (down from 50) are the publicly traded companies we feel best reflect the greater state of professional sports. You can view the names HERE.
In order to construct a portfolio that honored our revamped mission statement, we elected to alter some of index’s guidelines and requirements. The biggest change was in how JSSI components are weighted. It is our belief that an equally weighted index (each stock is 2.5% of index) will better reflect the relative health of the industry than a market cap weighted index that overemphasizes the largest names—a problem that becomes even more pronounced with the addition of Amazon. For perspective, the JSSI’s total market cap is close to $3 trillion; more than half of that value can be attributed to the e-commerce giant alone. We did consider an unbalanced portfolio, but trying to delineate the percentage of sports revenue derived from some of the component’s businesses is a difficult if not impossible task.
The move toward an equally weighted index also enables us to include micro-cap names. We elected to leave out companies like Dover Motorsports, Daktronics and Collectors Universe the first time around, as the accounting method used at the time made their presence inconsequential.
There are several requirements that components must meet to remain in the index. The company must trade in the U.S. (over-the-counter is fine), have a market cap of at least $50 million and maintain an average daily trading volume of at least 2,000 shares (based on the company ticker that trades most frequently). Companies that fail to meet all three requirements, who experience a significant corporate event (think: bankruptcy, sale) or pivot in strategy away from professional sports may be dropped from the index. We do expect that over time companies worthy of inclusion will emerge. Should we decide to add a new company, another component of the index would be dropped (we want to keep it to 40 names). The JSSI will be rebalanced on a quarterly basis.
Backtesting of the revamped equal weight JSSI showed the strength of the pro sports business over the last five years. Through June (and without Amazon included), the index beat the market by +9.5 percentage points—returning +92% to the S&P’s +82.5%. (We started with 36 components, adding companies as they became available to trade.) With Amazon in the index, the JSSI would have delivered near triple-digit returns. The JohnWallStreet Sports Stock Index also beat the S&P 500 in 33 of 60 months tested and four of the past five years. With pro sports grounded for a large part of 2020, it’s not a surprise the JSSI is lagging behind a bit this year. For what it’s worth, the updated JJSI gained +12.7% in August compared to the S&P’s +7.8%.
Moving forward, expect to see more content tied to the index. In addition to reporting daily performance relative to the S&P, NASDAQ and DJIA, we’ll identify the JSSI’s three biggest absolute movers and any company headlines you should be paying attention to. We also plan to increase our focus on all 40 names as we look to fill the gap left by the street, where analysts tend to focus on the biggest names.
Disclaimer: The JohnWallStreet Sports Stock Index exists solely for tracking purposes. We are not encouraging anyone to invest in this specific basket of companies.
JohnWallStreet Index: 1,113.28 (-0.29%)
NASDAQ: 11,313.13 (-1.27%)
S&P: 3,426.96 (-0.81%)
DJI: 28,133.31 (-0.56%)
Note: We established the JohnWallStreet index at a base level of 1,000 ($100,000 theoretical investment/100) before the open of trading on August 3rd. In other words, the JSSI index represents performance from the start of August to date.
JSSI Biggest Movers (Sept. 4):
- TSCRF .50 (+8.67%)
- JVTSF 1.00 (-4.76%)
- HOFV 3.86 (-3.74%)