FC Porto are not the team with the most Portuguese league titles. They are not the team with the most Portuguese cup titles. They are certainly not the team with the most European Cup or Club World Cup titles. Porto might not be the first team that comes to mind when thinking of the sport’s historical top exponents. Over the last decade, however, Porto have consolidated themselves as the undisputed leaders in a very particular area of game: the transfer market. While some teams have acquired fame for their overwhelming spending summer after summer —more often than not thanks to the monetary backing of Eastern European or Middle Eastern investors—, Porto have mastered an investment approach that any Wall Street stockbroker would envy. Their keen eye for scouting young and affordable talents, combined with the nearly top-flight level of soccer to which it exposes its signings in the Portuguese league, allows for Porto to dramatically increase the market value of their players over relatively short periods of time. As a result, FC Porto have tapped into the quick appreciation of their players, generating a whopping $652 million profit over the last decade in transfers alone!
When measuring gains from the transfer market, most sources simply add up the fees received and subtract the fees paid by the club in question, finding a net cash flow for a particular period of time. However, my calculation is based only on the players the club has sold over the last decade —i.e., since the summer of 2005. I then subtracted the original sum paid for each player, regardless of whether the player was bought before or after the summer of 2005. This makes the final figure more realistic. Imagine, for example, that a player was bought in 2003 and sold in 2006. If we only calculated cash inflows and outflows for the last decade, the fee received for the player’s sale would be accounted for, while the fee paid at the time of purchase would not; this would overstate the total gains on transfers. Conversely, if a player was bought in 2014 and hasn’t been sold yet —i.e., he remains a squad player—, only the fee paid for him would be accounted for, thus understating the total gains of transfer. Since it would be unwise to assume that the inflows ignored on one end would roughly offset the outflows on the other, particularly considering the noticeable inflation of transfer fees in recent years, I found my calculation to be more accurate. Table 1 presents such an analysis for FC Porto, sorted based on the net gain on each player, from highest to lowest. (Click on the table to zoom in).
The list contains some remarkable names, with Colombian stars James Rodríguez (Real Madrid) and Falcao (AS Monaco) as the most notable. The list also includes Portuguese center backs Ricardo Carvalho (AS Monaco), Pepe (Real Madrid), and Bruno Alves (Fenerbahçe), Brazilian star Hulk (Zenit St. Petersburg), young Argentinian talents Juan Iturbe (AS Roma) and Nicolás Otamendi (Valencia), and former FC Barcelona legend Deco. Recognizing these names is now an easy task, after such great players have proven their talent across Europe’s most prominent leagues, as well as in international competitions. However, in most cases, they were rather fameless before signing with Porto. This is evidenced by the relatively low transfer fees that the Portuguese club had to pay for the players. Notice for example that the club only paid more than $20 million for one player in the last ten years —$27.9M to Japan’s Tokyo Verdy, for the services of then 21-year-old Hulk. Other than Hulk, Porto has paid under $20M for all the players it has sold in the last decade, including James Rodríguez and Falcao, who have an estimated current market value of $52.8 million and $39.6 million, respectively.
The Portuguese club’s secret to success was, undoubtedly, its ability to pinpoint which players in less prominent leagues had shown great potential and were on the verge of a rapid performance burst. Exposing these players to the relatively competitive Portuguese league not only aided such a burst, but it also served as a way to showcase the rising talents that would allure the clubs with higher purchasing power across Europe. This quick increase in market value is measured in the right-most column of Table 1, which calculates the yearly dollar appreciation of each player —i.e., the net gain (loss) on the player divided by the number of years the player was at the club. Notice, for example, that Falcao was bought for just under $8M and sold for $58.7M after only two years, yielding an annual appreciation of over $25M per year —mainly due to the record 17 goals he scored that helped Porto clinch the 2011 UEFA Europa League title. Other noteworthy cases are those of defender Aly Cissokho, who became $23.3M more expensive in the one year he played for Porto, and playmaker James Rodríguez, who picked up $18.4M per year before being sold to AS Monaco for over $66M in the summer of 2013, after 3 years in Portugal.
Of course, the greatness of FC Porto’s numbers can only be praised in context, when compared to those of other clubs. I selected four similar teams, in terms of their budget, high-selling transfer history, and level of domestic and international success.
These are Atlético de Madrid (Spain), Tottenham Hotspur (England), AC Milan (Italy), and —as the closest point of comparison— Benfica (Portugal). After performing the same calculations for all of these clubs, it became clear that Porto’s fame of transfer market masterminds is well deserved. In the last decade’s worth of transfers, Porto outperformed Portuguese archrivals Benfica by almost $200M —not to say that Benfica’s $457.7M gains from the transfer market are not staggering as well. Atlético de Madrid made $93.6M, closely followed by Tottenham Hotspur with $91.1M. Meanwhile, AC Milan, renowned for multiple expensive sales in the last decade, actually lost $104.4M from their transfer market activity. FC Porto’s dominance is exhibited in almost all key statistics presented in Table 2. Not only did they have the highest percentage of positive transfers —i.e., when a player was sold for more than what he was purchased—, but they also led the group in terms of average gain per player and average annual appreciation per player. Most remarkably, they were the club with the highest percentage of transfers yielding $20M+ gains and the club with the lowest percentage of transfers yielding $5M+ losses; talk about maximizing profit and minimizing losses!
Benfica’s statistics, the only ones remotely close to Porto’s, show that a transfer policy of careful scouting and continuous reinvestment of transfer market gains is almost inherent to top Portuguese teams. Atlético de Madrid and Tottenham Hotspur, belonging to the more competitive Spanish and English leagues, respectively, usually seek somewhat older and more consolidated players. With slightly higher budgets than Porto and Benfica, they can afford to pay marginally higher transfer fees for players who have shown promise in nearly top-flight leagues like —you guessed it— the Portuguese league. Case in point, it was Atlético de Madrid that bought Falcao from Porto in 2011 for $58.7M. Clearly, maximizing the market value of moderately popular players in their mid-twenties is more difficult than doing so for 19-, 20-, or 21-year-olds on the rise. Thus, neither Atlético nor Tottenham embrace that strategy. They rely more heavily on their budgets than their transfer market gains when signing players season after season. Still, those following the transfer market in the last couple of years will know that Tottenham, despite making the sale with the highest fee in the world ($137.9M) and the highest gain among the selected clubs ($116.3M), both for Welshman Gareth Bale, have done a poor job at using such high gains to maintain a competitive squad.
AC Milan have also made multiple notorious high-grossing sales in the last decade, such as those of Kaká to Real Madrid ($95.3M), Andriy Shevchenko to Chelsea ($63.5M), and Thiago Silva to Paris Saint-Germain ($61.6M). However, their poor performance in terms of transfer market gains is mostly due to their policy of retaining first squad players for many years. The “Average Years at Club” statistic does not reveal this fact directly, because it accounts for the sale of rotation and incoming youth squad players who leave the club after three years or less. However, we can see that nearly 10% of AC Milan’s players sold in the last decade spent 7 or more years at the club —Nesta, Seedorf, Pirlo, and Gattuso being some relevant examples. This represents a far higher percentage than those of all other selected teams, and it also implies that players are sold when they are much older and their market value has decreased. Although they clearly do not yield high monetary gains, these players do provide the more abstract benefit given by their many years of service; they amortize through time, sort of say.
Given their current squad, FC Porto’s dominance in the transfer market will certainly continue in the coming years. If we perform a similar analysis on the players of the current squad as the one performed on only those who had been sold in the last decade, we are able to account for the money spent by Porto in players that have not yet been sold.
This analysis, presented in Table 4, calculates the potential gains or losses on each player if they were sold today at their estimated current market value. If sold today at market value, 30 out of 38 players would bring in a net gain to the club —i.e., they have become more valuable in their time at Porto. Considering that most current squad players have been in the club for less than three years, it is most impressive that Porto have already managed to appreciate their squad to a net unrealized profit of over $150M, representing an 88.44% potential gain! Porto’s most valuable players, namely Jackson Martínez, Alex Sandro, and Yacine Brahimi, as well as many youngsters in the team, could and probably will be sold at a premium in the coming years.
Finally, and just for fun, here is what Porto’s squad could look like today if they had been able to retain all their top players from the last few years. This is obviously a pointless experiment, as the gains from some players’ transfers clearly allowed for the purchase of other players. However, it still speaks to the club’s unparalleled ability to find and develop future world talents —an ability that has made them the clear champions of the transfer market in the past and will continue to do so in years to come.
Image of Jackson Martinez is from soccerlens.com
Juan Posada is a rising Junior in the McDonough School of Business.
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