The Investment column: Don't score an own-goal if you invest in football clubs

It has been quite a week for football. Millwall called in the administrators, Bournemouth went into receivership, Rangers received a pounds 40m cash injection from billionaire tax exile Joe Lewis while PizzaExpress entrepreneur Peter Boizot bought Peterborough. Football, as never before, is stealing the headlines on the business pages.

Even more worryingly, according to ShareLink five of last week's top 10 most heavily bought shares were football clubs, including Millwall. Even Alan Hansen, one of the most respected commentators on activities on the pitch, has put his name to a football investment fund run by Singer & Friedlander. If ever there were a sign that a bull market was ready to boil over surely it is this.

As with all investment stories at the height of market booms, there is more than a grain of truth in the apparent attractions of football and over the past year shares in the growing number of quoted football clubs have outperformed the rest of the market by a stunning margin. The trouble is, football's dazzling run so far does not mean it will continue to be such a great investment.

The bull case for football rests on a number of pretty compelling arguments. The game has been transformed since the Taylor report of 1990 was published, with far-reaching implications for safety standards, communication between clubs and fans and the behaviour of players and the media.

Arguably the report marked a watershed in the game, creating a family and television-friendly leisure activity with huge commercial potential out of the ruins of a hooliganised, male-dominated anachronism of a sport. As the chart shows, the decline in football violence and rising crowds have moved hand in hand.

The stock market has been slow to catch on to the full implications of those changes, but a number of recent developments have switched it on to the lucrative potential of football. Most important of these has been the rising role of television and especially pay-per-view deals.

Other developments have also had a large impact, however, including a growing appreciation of the role of merchandising, sponsorship and asset utilisation. In no other business would a company's major asset be used for only 90 minutes a week.

That has changed and the market has rushed for a share of the action to the extent that a leading club like Manchester United is now valued at the best part of pounds 500m. But anyone tempted by the sparkling share price performances of companies like Celtic, Chelsea Village and Caspian (Leeds) over the past 12 months should tread carefully.

Manchester United has a prosperous future because it has an instantly recognisable brand, more or less guaranteed income from television and the virtuous circle of success on the field leading to growing revenues. Most clubs do not have that potential.

The spiralling wage bills that will inevitably accompany such high potential profits will price all but a handful of clubs out of the financial premiership. Already, as the chart shows, they use up a large chunk of the lesser clubs' income.

The fact remains that most clubs are not profitable and those that are not propped up by a wealthy benefactor are dependent on the goodwill of their bankers to keep them afloat. More than anywhere the riches of football will fall on the biggest pile and the ratings currently enjoyed by second- line clubs will prove unsustainable.