Things we should have asked Warren Buffett about the other day....

 Wonder what ol' Mad Money Cramer is thinking about NASCAR these days? Maybe it's time for an update.  (Photo: Getty Images for NASCAR)
 
 

   By Mike Mulhern
   mikemulhern.net

   KANSAS CITY, Kansas
   Psst! Wanna hot tip?
   Buy NASCAR.
   No, not the privately-held, family-owned stock car racing sanctioning body down in Daytona Beach, Fla.
   Probably only the Disney people or Warren Buffett could make that deal with the Frances.
   But you can buy into the next best thing, the family's International Speedway Corp.
   That's like ISCA-NASDAQ.
   Oh, I know: television ratings are in a slump, even in the championship playoffs, and some of the stadiums aren't playing to those huge sellout crowds anymore, and teams themselves are pressing hard to get sponsorship dollars to keep racing.
   Is this sport in 'decline,' or poised for a comeback?
   Well, let's look at this whole situation from a different angle:
   Is this a 'buy-low' opportunity? What does Wall Street think?
   Okay, so the stock chart doesn't look great, to say the least. (Here's one look: http://bit.ly/9k7vyX )
   And all those purges down in Daytona, well, that's not awe-inspiring news.
   And what to expect in the grandstands next week at California's Auto Club Speedway is problematic, again.
   But, as Jim 'Mad Money' Cramer would say – consider the fundamentals here.
   And at least this isn't just another Jimmie Johnson or Clint Bowyer story...

   The sport of NASCAR racing may be in something of a down-cycle right now, with some even questioning its relevance on the American sports scene these days, with the rival NFL running so strongly.
   But the fundamentals of this sport are still really pretty darned impressive.
   Yes, really, though that may be hard to see at the moment, with the Sprint Cup chase opening on a pair of TV downers (New Hampshire, a dismal 2.3 rating; Dover, 2.4).
  
  

    So is Lesa France Kennedy's company now a 'buy' on Wall Street? One analyst suggests ISC is poised to nearly double in price (Photo: Getty Images for NASCAR)
  

   However look bigger picture.
   Longer term.
   Consider a couple of the most obvious points.
   Uh, let's start with the biggie: M-O-N-O-P-O-L-Y.
   Now we're not going to get into the legalese; read the Kentucky Speedway case file, if you want that.
   We're talking about NASCAR racing as the only game in town, if you're dealing in race cars and marketing.
   Let's next consider the future. And consider the past, like in longevity: NASCAR has been around running this sport since 1949 or so, and these guys know how to run the sport and play the games.
    Sure, they may make some big mistakes here and there.
   Maybe the car-of-tomorrow has been a dog...and some of those outrageous penalties (consider the 'death penalties' on Carl Long last year and Clint Bowyer just recently) are, well, simply outrageously bad PR...and maybe sometimes these guys seem to be playing in some never-never-land, with little sense of reality.
   Maybe you didn't like them shutting down North Carolina Motor Speedway and North Wilkesboro Speedway and moving the Southern 500 from legendary Darlington Raceway out to the trucking capital of the U.S.....
   And maybe the sport overall misses the marketing and promotional prowess of R. J. Reynolds more than Daytona execs might like to admit.

   (Side note here: anyone reading all this as some softball story, or think this is just blowing smoke, can check out a few other recent op-ed items on mikemulhern.net, like   http://bit.ly/aa2MOo  and  http://bit.ly/96fi2S and http://bit.ly/9Wf2gx and http://bit.ly/cGyA4s ).

   
The view from high atop Kansas Speedway, which will host two Sprint Cup events in 2011, and open a big new casino (Photo: Getty Images for NASCAR)
  

  
But:
   Look at the bigger picture.
   You wanna race big-time?
   One option.
   NASCAR, and it's big tracks.
   First, NASCAR effectively 'owns' the limited number of Sprint Cup weekend race dates.
   Two, no one else has stadiums like these.
   And there are really only two good ways to play this stadium game, buying ISCA, or buying rival Speedway Motorsports (NYSE: TRK), which is run by firebrand and loveable pitchman Bruton Smith. (Who else would be brave enough to call the rival Homestead-Miami track part of 'north Cuba'? Who else would diss New York City so hard over that post-season NASCAR banquet. There are more than enough Bruton-isms to fill a book....)
   When you look at a place like Bristol Motor Speedway, with some 160,000 people packed into a tiny yet gigantic stadium in the heart of the Blue Ridge for two NASCAR weekend each season, well, that alone should be enough to rest the case.

   But let's dig deeper, as we like to do here at www.mikemulhern.net.
   Sure, maybe these promoters overbuilt grandstands.
   Sure, maybe Smith overpaid, at $340 million, for New Hampshire Motor Speedway three years ago. (Remember when Smith bought half of North Wilkesboro in 1996 for just $6 million, and then Bob Bahre bought the other half for just $7 million?)
   And, sure, maybe ISC overpaid, at $215 million, for Richmond International Raceway 10 years ago, or maybe not.
   But Smith's deal for Kentucky Motor Speedway could turn out to be a sweet one (albeit controversial). That track, which cost $150 million to build, was essentially worthless without a Cup date; so Smith could buy it for a song.
     
     

       Speedway Motorsports' Bruton Smith (R) and Texas governor Rick Perry. If you want to 'buy' NASCAR, the two clearest plays are the France family's International Speedway Corp. or Smith's SMI. (Photo: Getty Images for NASCAR)
     

   It was hard to recall last Sunday, looking at the relatively modest crowd in the stands, that Dover International Speedway not so long ago had the ambitious plan of expanding to 150,000 seats. And, yes, that estimated crowd figure of 88,000 for last weekend's Dover 400 might have been a tad high.
   And, yes, there are good seats still available for just about every NASCAR championship chase race (check out tickets for California's Auto Club Speedway event next Sunday, by clicking the banner at the top of the home page of mikemulhern.net, and check out tickets for Texas' chase 500 too, coming up in a couple of weeks).
   Richmond International Raceway has cut back from something like 112,000 seats to 97,000, abandoning any plans for 150,000 seats...Texas Motor Speedway has cut seating too, and so has Daytona, and other tracks.
   Got to look good on TV.
   (Fortunately no one is this sport has yet gone to the extreme of filling empty grandstands with giant posters of 'virtual fans,' like that Italian soccer team has.)
   'Hospitality' – all those lavish suites and big white tents – may be on corporate backburners right now, as far as NASCAR tracks are concerned.
   And Souvenir Rows at these tracks may look a little vacant at the moment, with a lot of $25 tee-shirts and caps sitting idle.

    Kansas City itself is just down the road from Kansas Speedway. You can see just how close, in this shot from the grandstands (Photo: Getty Images for NASCAR)
  

   But getting back to this particular chase:
   -- You wanna put on a race of your own, say, like the Indy-car series? You've got to deal with either Bruton Smith or the France family, if you want to race on a real track, not some made-up street course.
   -- You wanna sell cars and trucks, like Ford and Toyota and General Motors and Dodge? You need to deal with the people who own these big racing stadiums. (Ask Honda how its own racing deals are going....)
  -- You want markets? Yes, NASCAR has a few holes, like Seattle, Denver and New York City (Pocono is a play, just 90 minutes from the Holland Tunnel, but, well, that whole situation is ripe for vigorous debate.)
  Consider this sport's reach otherwise:
  ISCA, with 12 major facilities, has Los Angeles (well, okay, Fontana isn't Hollywood), Miami, Phoenix, Richmond/Washington/Norfolk, Detroit, Chicago (yeah, yeah, it's still Joliet), the North Carolina Piedmont Triad, and Kansas City, along with iconic tracks like Daytona, Talladega, Watkins Glen, and Darlington, all with historic racing legacies.
   SMI, with now eight major facilities, has San Francisco, Boston, Dallas-Fort Worth, Atlanta, Louisville-Lexington, Las Vegas, Charlotte and iconic Bristol.
   Not a bad marketing map to work with....
   And then there is the potential wild card, Dover International Speedway, which may have opened the door to a bidding war between Smith and the Frances by announcing a few days ago it wanted to re-merge with Dover Downs casino operations. (The two 'Dovers' split in 2002.) In 2007 Smith and Lesa Kennedy offered to buy the Dover track for about $6 a share, then market value; Dover (NYSE: DVD) is currently trading at about $1.95 a share, and its market cap is about $70 million. Conservatively, even in today's market, the Dover track, with its two Cup dates, would likely fetch about $200 million on the open market. However, where the majority stockholder Henry Tippie might weigh in on this isn't clear. And what Smith and Kennedy might do with Dover if they were to purchase it is also unclear. Dover is just an hour south of Philadelphia and about two hours east of Washington-Baltimore, prime market areas.
  
  

    So, Jim Cramer: think it's time to put a 'buy' rating on Carl Edwards' championship chances? (Photo: Getty Images for NASCAR)
  

   Not that we are astute Wall Street analysts, but the business line looks like this: This sport may be down right now, but it's not going away, and eventually it's going back up.
   How far up? Just where is this sport's equilibrium level. The year 2000? The year 1990? The year 1980? That remains to be seen.
   But eventually this sport is going to rebound.
   So how to play that pending rise?
   Side bets on Detroit and/or Toyota...maybe plays on the current roster of big companies in NASCAR, like Lowe's, Home Depot, Caterpillar, DuPont, UPS, FedEx, Target, McDonald's, Shell, 3M, Diageo (Crown Royal), Exxon-Mobil, NAPA, Nationwide, Geico, BB&T, Coca-Cola, Pepsi, Anheuser-Busch, Miller, Best Buy?
   (Whatever happened to that stock car racing portfolio instrument that allowed you to invest in a mixture of NASCAR-related stocks?)

   However when it comes to investing, there's nothing quite like investing in a virtual monopoly.
   Microsoft, Intel, Apple....and NASCAR?
  
  

  How is Warren Buffett (L, with Kyle Busch) playing NASCAR today? ISCA or TRK, or what.....(Photo: Getty Images for NASCAR)
  

   One analyst suggests ISCA stock is grossly undervalued, because in part the sport seems all-but dead in the water at the moment.
   This analyst suggests the real value of the stock – and at this point we should say we're trying to make a statement about the 'real' value of this sport itself, not simply Wall Street hoodoo – may be close to $40 a share.
   It closed Friday at about $24.46 a share, well off it's 52-week high of $31.12....and well down from those heady days back in 2006 when it was $58.
   But then crunch the numbers yourself, and tell us if we're right or wrong.
   And when we get to Charlotte in a couple of weeks, we'll check out the case for TRK.
   Hey, wonder when 'Mad Money' himself might show up again to host a CNBC show about all this....from one of these NASCAR tracks, perhaps?

    What would Waylon and Willie and the boys think about NASCAR today? Styx here, on stage at California's Auto Club Speedway (Photo: Getty Images for NASCAR)