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Analyzing the Construction of the Houston Rockets Roster from the Perspective of an Investor

“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return.” – Benjamin Graham, The Intelligent Investor

“I believe that the greatest long-range investment profits are never obtained by investing in marginal companies.” – Philip Fischer, Common Stocks and Uncommon Profits

Benjamin Graham, often considered the founder of “value investing,” published the most influential book in investing, Security Analysis, in 1934. The book was, in many ways, written in response to the rampant stock market speculation that led to the great Wall Street Crash of 1929 and comprehensive in laying out the intellectual foundation of value investing, which involves buying assets that appear underpriced based on some form of fundamental analysis. Mr. Graham would go on to be the mentor to famed investor Warren Buffet, as well as publish The Intelligent Investor, a more focused version of Graham’s value investment philosophies, which became one of the greatest selling books on investing.

Philip Fisher, on the other hand, was notable for being one of the founding architects of “growth investing,” a style of investing that is less focused on buying undervalued assets and more so on those that can generate long-term capital appreciation. His landmark publication, Common Stock and Uncommon Profits, published in 1957, placed a premium on companies that were able to grow exponentially versus companies that were simply undervalued. The reasoning is simple; from Fisher in Common Stocks and Uncommon Profits:

“The reason why the growth stocks do so much better is that they seem to show gains in value in the hundreds of per cent each decade. In contrast, it is an unusual bargain that is as much as 50 per cent undervalued. The cumulative effect of this simple arithmetic should be obvious.”

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Coronavirus, the NBA, and the Houston Rockets: Assessing the Financial Impact (Part 2)

More than a month has passed since I initially wrote about the coronavirus pandemic and its impact on the NBA and the Houston Rockets. That month has felt like five years, as the world has dramatically been impacted by COVID-19. Countries, states and cities have imposed lock-downs as citizens have been forced to self-quarantine while businesses around the world have closed their doors.

Just as Americans became focused on flattening the curve as it relates to COVID-19, they need to think about doing the same for the U.S. economy.

In my first article, I argued the economic impact would have a far greater and lasting impact than the virus itself. While social distancing measures have been successful in slowing the spread of coronavirus – the number of potential deaths in the United States has been downwardly revised from a staggering 2.2 million to 200,000 to 60,000 – it has come at a steep economic cost not seen since the Great Depression. The U.S. GDP is expected to contract, on an annualized basis, an unfathomable 30% in the second quarter. The U.S.’ annual GDP is approximately $21 trillion, so this would result in a loss of $7 trillion, or $1.75 trillion per quarter. The $2 trillion stimulus package passed by Congress certainly helps in offsetting this loss, but there may be another round necessary, as it could take companies years to regain pre-COVID 19 performance and employment levels. More devastating is the 22 million Americans that have filed for unemployment in less than a month, putting the United States’ unemployment rate at 17.5%, nearly double of the 2008 Great Recession’s unemployment peak of 10%. Most major retailers that have been forced to close have furloughed as much as 90% of their staff, and the great fear is that the longer coronavirus-imposed shutdowns occurs, the more these furloughed employees could eventually be permanently laid off. There have been studies that have found unemployment has an adverse impact on one’s mental health, an intangible repercussion that simply can’t be quantified neatly in a chart. Just as Americans became focused on flattening the curve as it relates to COVID-19, they need to think about doing the same for the U.S. economy.

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On The Landscape of Live Sports Streaming

With the COVID-19 pandemic having gripped the nation and forcing Americans to self-quarantine, there is probably no better time to discuss the future of streaming in sports and in the NBA. Industries that primarily require physical presence in order to generate commerce, such as brick-and-mortar retail, airline travel, live events, hospitality, casinos and restaurants, have fallen to standstill in the wake of government-ordered shelter-in-places. Conversely, companies that are catering to our new quarantined reality have thrived.

The old adage in the media and entertainment business is that “content is king,” and live sports has certainly worn the crown for some time.

Zoom Video Communications (ZM), a company whose primary purpose is web-based video conferencing, has seen its share price double in value in little over a month. Amazon, which, over the years, had realized the importance of establishing a physical retail presence through its acquisition of Whole Foods and establishment of Amazon-branded storefronts, is now banking more than ever on its unrivaled e-commerce platform, as Americans are unable to shop for goods other than those provided at “essential businesses.” As such, Amazon’s stock price has increased in a time where businesses more vulnerable to the pandemic have declined as much as 70%. The value of streaming giant Netflix dipped approximately 25% in mid-March, though has since recuperated much of that value, as its 167 million subscribers are more captive than ever to its now expansive collection of original content. Which brings us to evaluating the current state of streaming in sports.