Published March 5th, 2023 by Ryan Krueger
This article is a guest contribution from Ryan Krueger. Ryan Krueger is Founder & CEO of Freedom Day Solutions, an independent investment firm serving families across the country, who are ready to find true peace of mind from one source of personal care across: 1) Financial Planning 2) Investment Management 3) Ongoing Advice. To learn more, visit their website: freedomdaysolutions.com or listen to their podcast.
The greatest part about sports or capitalism is that you just don’t know what is going to happen next. So, if you want to see or participate in something that may turn out great, it pays to always be curious and never convinced. The biggest upside is located at the intersection of doubt and change.
Plenty of doubt surrounded a guy named Abe Saperstein who stood 5’3” and somehow had a vision for the game of basketball that outstretched any other. He coached a team called the Savoy Big 5 that he built from high schoolers in Chicago. He drove the only five members of the all-black team stuffed in his car to each game beginning in 1927. Abe wore a jersey underneath his suit in case they ever needed one white substitute. Trying to imagine what would appeal to even more good players, Abe changed the name to the Harlem Globetrotters.
The most impossible to beat Lakers, led by the most immovable object George Mikan were challenged to a game by the Globetrotters. Mikan was the most dominant force the game of basketball had ever seen. The first superstar of the new NBA, rules were changed because of his 6 foot 10 inch size and power. Nobody could stop his Lakers from becoming world champions five times from 1949 to 1954.
The Globetrotters were not entertaining crowds with tricks back then, they were beating opponents with a new brand of fast-paced basketball, a completely different game than Mikan’s team was dominating. The Globetrotters would play any team they could find in segregated leagues, and their record in straight-up competitive games was 397-32.
Nobody gave the Globetrotters a chance to compete with the Lakers when they agreed to play them in a real game. At a time when the all-white professional league was having trouble with attendance because of its slow pace, the Chicago Stadium’s 18,000 seat arena was sold out for the Lakers versus Globetrotters.
Mikan’s Lakers cruised out to an early halftime lead. The Globetrotters adjusted and double-teamed Mikan. Sweetwater Clifton (left) and Babe Pressley (right) held Mikan to 6 points in the second half and drew a technical foul in Mikan’s frustration. The Globetrotters came all the way back and shocked the sport, winning 61-59.
“Genius… means little more than the faculty to perceive in an unhabitual way.”
-William James
The Lakers took their opponent much more seriously when they played a rematch the following year. The Globetrotters won again. This time they built a lead large enough to include some crowd-pleasing antics near the end. An even bigger stage was then imagined.
The little team crammed into one car went from playing anybody they could find, to building a business that transcended any league. No holdouts, strikes or protests, they decided making smiles around the world can be a recession proof booming business.
As a traditional sports fanatic with 5 kids, I can say without hesitation that a Globetrotter floor ticket (less than the cost thirty rows higher in what might be half-hearted NBA game) is by far the best ROI as a dad.
Some tickets come with surprising upside. My son was asked by “Big Easy” if he thought he could make one shot in the middle of a game with the Globetrotters trailing by a point.
I take one kid each year and enjoyed talking about the history of this team, when my other son wondered why Sweet Lou Dunbar was crying at halftime when they retired his number.
I guess that is why I like reading before I go somewhere, to provide the history of just how meaningful some of those shocking changes really are. You never know what is going to happen next, to change any unrivaled assumptions…
Like Mikan’s Lakers, the United States team of stocks command the most attention and capital for good reasons. I am not selling any of my U.S. stocks. But I think there are a few teams likely to be underestimated if you are willing to trot the globe looking for undervalued tickets to invest in.
“Doubt is the origin of wisdom.”
-Rene Descartes
Investors do not like to bet on underdogs. As you can see, if you compare the size of the U.S. to the number of tickets bought to get in its Stock Market, we are paying a huge premium in market capitalization for what many perceive as the only game in town. But towns can change…
It may also pay off to apply a wider lens for teams loaded with talent just joining the league of capitalism online. Many dismissed the Globetrotters faster pace as reckless and way too risky. Just don’t be surprised when some games are won that way too.
I recently spoke with one of India’s neighbors, who lives in a country growing even faster – Bangladesh. Imagine if more than half the entire U.S. population lived inside the space of Iowa. That’s Bangladesh. My friend who moved there is a Texan who wanted his boots on the ground to take advantage of early stage investment opportunities. One of the CEO’s he backed runs an online education platform. He summarized the different starting points (and upside) for investment tickets in developing markets vs. the United States: “I am dealing with 90 million people who have no access to education, and I’ve raised $5.6 million busting a gut for the last three years, while a dog walking app in Silicon Valley has raised $200 million.”
GDPs have more room to grow outside the U.S., and they are shifting to more domestic consumption. Standards of living have substantially more room to improve outside the U.S. That’s a good problem to have for Americans, and a greater problem for investors to solve elsewhere.
Despite all that change, there is still plenty of doubt. The original Goldman Sachs BRICS fund, coined by an economist who predicted where the fastest emerging market growth would come from, was shut down after the crowd of investors voted with their feet and sold, assets falling about 90% from its peak. Courtside tickets are relatively cheap in case there are any surprises tipping off…
There are many ways to invest overseas, with plenty of risk on all of them, to be clear. I will share two ways I choose to do it. As a dividend growth portfolio manager for 26 years, I believe in active management for both the concentration of a rules-based selection process and for sell disciplines – that are not available in passive investments. However, I will gladly take that hat off outside the United States and share that I personally own international index ETFs, for a very small portion of my nest egg, in order to gain the broadest most efficient exposure.
But, I also choose to include overseas investment exposure right here in our backyards. Our firm measures each U.S. dividend growth stock’s source of revenues – domestic vs. international. Some of our current holdings generate the majority of their sales overseas. So, we get the best of both worlds, in our opinion, of best in class reporting and accounting standards to be listed on the New York Stock Exchange, while growing our dividends from stronger consumer demand in other parts of the world.
One example of a U.S. company with a majority of its operating revenues from overseas is benefitting from a shift to passive index investing. MSCI is the largest provider of international indexes, to be licensed by fund companies. This growth in assets shown below is particularly impressive when you consider the headwinds of consistent underperformance of international indexes compared to the United States over this same time period.
Actively managing our way down the sidewalk to a mailbox, to receive rising dividends as a stakeholder in the growth of passive indexes is one of my favorite uncrowded ways to avoid debates about what is better – active or passive investing? Yes.
To be a stakeholder in the parent company feels like something better than buying a ticket to a game, but more like owning a piece of all the arenas they play in, as the league keeps improving.
The year after the Globetrotters beat the Lakers again in their rematch, the Boston Celtics made Chuck Cooper the first African American drafted in the NBA in 1950. Shortly after that, Nat “Sweetwater” Clifton from the Globetrotters signed a contract with the New York Knicks.
Bigger than any player loss, game won, or league changed, the Harlem Globetrotters decided to widen their lens again and play capitalism from that point on. A business that sold to customers year-round in 123 different countries was an even better idea that nobody had considered, right after they’d done the unthinkable.
In a world of opportunities, curiosity beats conviction.