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Investors, start your engines. While most sports stocks have been laggards lately, one group--auto racing issues--has been going strong. ''The economics of the motor-sports industry are very, very attractive,'' says Scott Barry, an analyst who follows NASCAR track operators for Raymond James & Associates in St. Petersburg, Fla. ''You've got surging demand.''

No longer the exclusive province of blue-collar males in the Southeast, stock-car racing has broadened its appeal. The National Association for Stock Car Auto Racing, or NASCAR, has moved into major markets including Fort Worth, Los Angeles, and Las Vegas, and women now make up close to 40% of the fans. Indeed, attendance at NASCAR events has risen steadily during the decade, with the Winston Cup Series drawing more than 6 million spectators around the U.S. in 1997, up from 3.7 million in 1992. This year's attendance is expected to be up again.

PROMISING PAIR. If you want to invest in a NASCAR track operator, two key players are International Speedway and Speedway Motor Sports (table). International Speedway is the pricier of the two: Among its holdings is Florida's Daytona International Speedway, home of the sport's marquee event held every February. International Speedway trades around 30 times projected 1999 earnings of $1.10 a share, compared with a multiple of 21 for Speedway Motor Sports, according to Zacks Investment Research. But James Stoeffel, an analyst at Salomon Smith Barney, believes International Speedway is worth its premium. Besides Daytona International, its other well-known properties include Talladega Superspeedway in Alabama, he says.

Speedway Motor Sports' prospects are also bright. Based on analysts' estimates compiled by Zacks, earnings are expected to grow 22% annually over the next five years. It runs the Texas Motor Speedway in Fort Worth, a new facility whose grandstand holds 157,500 spectators and 194 luxury suites.

NASCAR operators are counting on continuing growth in ad revenues from cable and broadcast networks, even though TV ratings have sagged for many other sports. With ESPN, TNN, TBS, CBS, and ABC broadcasting races, TV rights can come to $2 million for an individual race--and sometimes a lot more than that. Other major revenue sources are also growing. Corporate sponsorships rose 9%, to $441 million, in 1997, says Barry of Raymond James, with Kmart, Procter & Gamble, and McDonald's among the big names backing events. Thanks to new facilities and the expansion of existing venues, many tracks now seat more than 100,000 spectators and offer plenty of lucrative luxury boxes that rent for $65,000 to $150,000 a year. ''This is just the type of thing sports sponsors want to be all over,'' says Salomon Smith Barney's Stoeffel.

If you'd rather not jump on one NASCAR stock, you can invest in the industry via the Stock Car Stocks Index Fund (877 223-3863). The tiny fund doesn't have a track record yet--it was launched on Oct. 1 with $600,000--but was up 14.4% through Nov. 10. It was founded by John Allen, 27, a former index fund exec at NationsBank who got into racing via his fiancee, whose dad handles marketing for the Citgo NASCAR team.

SELLING SOUVENIRS. Using a 52-stock index, the fund invests in track operators including Speedway Motor Sports as well as such NASCAR sponsors as Coca-Cola and Eastman Kodak. The fund also has a holding in Action Performance, which sells model-size replicas of NASCAR and other cars at race tracks and through retailers and collectors' clubs. Action Performance has expanded into NASCAR-related t-shirts, caps, and souvenirs and trades at 14 times estimated 1999 earnings of $2 per share.

The major concern the NASCAR industry faces is whether it can sustain its strong growth in track attendance, TV ratings, and corporate sponsorships. If this expansion slows--and all major sports have hit that wall at some point--NASCAR stocks could be in for a rough ride. But right now, investors are still flocking to stock-car equities with all the enthusiasm of race fans on a sunny Saturday.

By Lawrence Strauss


PHOTO: NASCAR Racing at Speedway Motor Sports

TABLE: Racing Leaders


Updated Nov. 19, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.
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