Shares that will be winners at the summer Games
There are still investment opportunities in the London Olympics, says Samantha Downes.
Saturday 28 January 2012
In exactly five months' time, to the day, the 2012 London Olympics opening ceremony will herald the start of the sporting world's greatest event. As soon as the games, current cost £10bn and counting, were awarded to London in 2005, experts heralded the huge investment opportunities it would present, citing areas such as infrastructure, tourism and property.
But even with just 20 weeks to go, there are still some short-term opportunities for investors who are seeking a sprinkling of sporting gold dust on their returns.
"During the games, hundreds of thousands of visitors will arrive along with the substantial sponsorship and media attention which can attribute much of the immediate economic benefit," points out Jon Wingent at Close Brothers Asset Management.
"Hosting an Olympics enhances investment opportunities that might not otherwise be there such as travel, tourism, leisure and retail. But the selective investment opportunities are much like holiday lets in that they are seasonal and unlikely to be long-term holds given the real economy that prevails behind the pomp and ceremony of the games."
Trevor Green, manager of UK equities at Aviva, is a bit more positive. He believes that the Olympics effect will outlast the games themselves for several months afterwards.
"The revenue potential for businesses associated with the event can last much longer than the 19 days it takes to stage the event," he says.
Even so, investing in the 2012 Olympics is not for the faint-hearted. The opportunities are better-suited for proactive investors who are prepared to ride out any stock market bumps.
Leisure and tourism
Leisure and tourism are a couple of the more obvious beneficiaries of the Olympics, according to investment advisers Hargreaves Lansdown.
The firm's Danny Cox says the brewery giant Greene King and airlines such as International Airline Group – which includes British Airways and Iberia – and easyJet could see their share prices rise as a result of increased tourism.
He says investors looking to spread their risk with a collective investment should consider Marlborough Multi-cap income fund, which has Greene King as its largest holding.
Travel company Thomas Cook may have been in the doldrums of late, but it could benefit from being both a direct sponsor and beneficiary of the Olympics, says Mr Cox.
The world's oldest travel firm is an official sponsor of this year's Olympics and Paralympics. As such, Mr Cox believes it could benefit from a corporate hospitality programme that will see it as the only official Olympics UK travel provider.
Meanwhile, Mr Green says the hotel sector will benefit from short-term gain.
"Already it appears some hotels intend to raise prices of up to five times their normal tariffs while the Olympics is on," he says. "Of course, if you are looking to book a hotel this is alarming, but it does suggest highly profitable times to come for some chains."
Firms that could benefit include Millennium & Copthorne and Whitbread, operator of the Premier Inn chain.
However, it's worth bearing in mind the example of thr 1996 Atlanta Games, says Mr Green, when the number of available hotel rooms ballooned by 15 per cent.
"The rooms may have been full for the duration of the Olympics, but all that extra supply destabilised the market after the visitors had gone."
Listed companies which specialise in sports and leisure stand to benefit from an increased interest in all things fitness related. Companies that could feel the love from the Olympics include Sports Direct.
"Despite many of its rivals floundering, Sports Direct, the UK's leading sports retailer, has prospered and will hope to benefit further from any Olympics-led boost to demand," says Mr Cox.
As the Olympics takes place outside the football season, Sports Direct could benefit from a fillip given that it would otherwise be in the middle of a summer lull, says Mr Green.
Other less obvious Olympic beneficiaries could include Halfords. The success of the UK's cycling team could provide the retailer with a lift in sales of its bicycles after those watching the world's best in action on their doorstep are inspired to give two wheels a go.
Energy and security
The security company G4S, which secured a £100m deal last March to provide security for the Olympic and Paralympic Games, could make much of the opportunity.
"It was also recently chosen as a preferred bidder for Project Compass, which relates to the provision of asylum-seeker support services," Mr Cox reports.
And of course athletes need hot (and cold) showers while they are training for the games.
"Energy company Aggreko is an exclusive supplier of temporary energy services for the London games. The company will provide about 220 megawatts of power, some 60 megawatts more than it supplied at the 2008 Beijing Olympic Games," Mr Cox points out.
Food and drink
Like them or loathe them McDonalds and Coca Cola are considered by analysts to be strong buys as their brands will be everywhere come the end of June.
McDonalds will open its largest outlet close to the Olympic Park ,while Coca Cola is said to be the most recognised official partner of the London 2012 Olympic and Paralympic Games in terms of consumer brand awareness.
Telecoms and other sponsors
"You could consider telecom companies such as Vodafone, which will experience increased mobile phone traffic in London and is a sponsor of the games," says Mr Cox.
Other sponsors worth considering include BP, Lloyds TSB and BT Group, while Neil Veitch of SVM Asset Management says Virgin Media is another stock to watch.
"It has pulled off a bit of a coup in recruiting the world's fastest man to front their latest advertising campaign. As Usain Bolt seeks to repeat his feats of Beijing 2008, expect the company to draw parallels between his performance and their broadband speeds."
Not everyone will want to watch the Olympics, and there may be those actively avoiding the games, particularly tourists who will consider the games as the perfect down time to explore what is considered one of the world's greatest shopping destinations.
"The West End of London has seen phenomenal growth recently on the back of a weak sterling as visitors have been attracted to London for shopping, as regularly highlighted by Shaftesbury, the West End real estate operator," says Mr Green.
He believes the retail effect can only magnify during the games as visitors split their time between watching sport and spending money in the capital.
"Luxury, world-famous UK brands like the Burberry Group, which has announced plans to double its existing store space in time, stand to gain from the influx of extra visitors coming to London," he predicts.
Then there are those companies that stand to gain from those who failed to get a ticket in the public ballot or who cannot afford the hotel prices to see the games live in London.
Mr Green says advertisers will be clamouring to get on TV.
"The Olympics are as big as it gets, and the London games are expected to surpass Beijing's 4.7 billion television viewers. Although the BBC will be the lead broadcaster, one of the biggest commercial beneficiaries will be rival ITV, as advertisers clamour to advertise during the games. This may just give a one-off benefit to the company, but it will be a very welcome boost nonetheless."
And those who can afford to advertise will gain too. "One company who may well be advertising on television is Britvic. Events such as the Olympics are not only good for sales but also offer an unrivalled opportunity to launch a new product onto the global market."
And ones to avoid
Of course, for every winner there has to be a loser, and not everyone will benefit from the games coming to London.
"Potential losers include Tui Travel," says Mr Green. "They will have the headache of bookings coming in even later than usual as the public decides at the last minute to go abroad pre or post the games, thus making their scheduling very difficult.
"Leisure operators such as Cineworld and Goals Soccer Centres may have a quiet 19 days as their customers' attention is focused elsewhere."
A run for their money
The Olympics (held from 27 July to 12 August) is expected to give a £5.1bn cash injection to the economy. The Paralympic Games follow from 29 August to 9 September.
During the Games, consumer spending is predicted to hit £750m. It will be the third time London has hosted the event. Previous times were in 1908 and 1948 (pictured: the wrestler Ray Myland).
A total of 204 nations are participating. There are 300 events to win medals in, made up of 26 sports, which break down into 39 disciplines.
There will be branding all over the Games, with 53 different companies having paid out to be associated with the event, including 11 worldwide partners and seven London 2012 Official Olympic Partners.
Londoners with property near Olympic venues are hoping to make a mint. There has been a 444 per cent increase in average asking prices for short-term rentals in July 2012 compared to July 2011's figure, according to Gumtree.com. The average price is now £2,858.33 per week.
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