Steinbrenner vs. The Market.

New York Yankees owner Georger Steinbrenner died yesterday at the age of 80.  This Smart Money article asks how George did as a money manager particularly versus the S&P 500.  Excerpt:

In 1973, George Steinbrenner headed a group that bought the then-slumping New York Yankees for $8.9 million. On Tuesday morning, Steinbrenner died at the age of 80 following a heart attack. During the years in between, his team made 10 trips to the World Series, winning seven times. In April, Forbes Magazine named the Yankees the most valuable baseball team, estimating its worth at $1.6 billion -- more than 197 times Steinbrenner's original price.

That's obviously a giant increase, but let's take a closer look at what kind of return it is after factoring in time. The numbers can sometimes deceive, after all. Manhattan was famously purchased by the Dutch from American Indians in 1626 for goods worth just over $1,000 in today's money. (Forget the $24 figure that's often cited. It comes from a 19th century estimate, and so must be indexed for inflation.) Manhattan has 14,528 acres, and the choicest acres are probably worth $90 million as unimproved land, according to a 2008 study by the Federal Reserve Bank of New York. Even if we assume that all of Manhattan's acres are as valuable as its best ones (I assure you they're not), that yields a total value for the island's land of $1.3 trillion. That's a 5.6% annual return, compounded -- and the real figure is surely lower. In other words, the Dutch might have overpaid.

Steinbrenner did better. Over 37 years, the Yankees appreciated at a compounded average rate of about 15% a year. That's five percentage points more than the S&P 500 index of large American companies returned during the same period. Just about any money manager would be proud of that record.

There are a couple of valuation issues to keep in mind, however. Stocks have excellent "price discovery" -- the mechanism that tells us what they're worth -- because they're bought and sold each business day. Baseball teams aren't. That makes the $1.6 billion Yankees price a highly theoretical one. It works out to about 3.6 times the organization's yearly revenues, which is higher than the S&P 500's median price/revenue ratio of 1.4......

In 2007, Liberty Media (LCAPA: 45.10*, -0.05, -0.11%) bought the Atlanta Braves from Time Warner (TWX: 30.80*, -0.12, -0.38%) in a complex stock-for-franchise deal that valued the team at $450 million.  Assuming $1.6 billion is the right price for the Yankees, there aren't many stocks that have done better since 1973.......

Link:  Steinbrenner vs. Stocks

*Long ETFs related to the S&P 500 in client and personal accounts.