Gambling operators are expected to gain momentum in the next months and in the long term with an increasing number of traders buying stocks or investing in thematic ETFs.
Stock Markets Hit Record Lows in March
In March, the world’s stock markets recorded all-time lows as Covid-19 started to spread rapidly outside of China and economies started shutting down one by one. On 20 March, the S&P 500 slumped by more than 30% from 3373.23 points a month before, Dow Jones Industrial Average (DJIA) also lost nearly 35% and Nasdaq 100 hit its lowest point losing 27% compared to the end of February 2020. Even though the countries reopened their economies, they are operating under various restrictions to mitigate the effect of the virus and stock markets are still volatile.
The Gambling Industry is Becoming a Hotspot for Investors
The first months of the health crisis were the worst for the gambling industry, as sporting events were cancelled, airplanes were landed and brick-and-mortar casinos were closed. For a few months, the sector was losing revenue, which was visible in the balance sheets of companies for the first and second quarter of the year. However, the financial results of gamblig operators for the third quarter of 2020 showed the companies were back in black as they adapted to the new normality and created strategic plans to move forward. The segment and its positive outlook for recovery, together with its extraordinary growth potential are now attracting the interest of stock market traders.
The thematic exchange-traded fund Roundhill Sports Betting & iGaming ETF (BETZ), which tracks the performance of the sports betting and iGaming industry, hit $100 million assets within three months of its launch.
“Sports betting allows people to be more engaged in the game, specifically every play, usually making it more fun and entertaining to watch.”
Luke Lloyd, wealth advisor and investment strategist, Strategic Wealth Partners
VanEck Vectors Gaming ETF (BJK) Attracts Bulls
The VanEck Vectors Gaming ETF (BJK) seeks to replicate the price and yield performance of the MVIS Global Gaming Index (MVBJKTR), which includes companies operating in the segment of casinos and casino hotels, sports betting, lottery and gaming services, as well as gaming technology. Since its slump in March, the ETF has started recovering its price and is now trading steadily above the psychological $40 mark, which makes it a good opportunity for bulls. Brokers will likely buy as close to the sideways trend as possible and then sell at $48.
Penn National Gaming Among the Top Performers in 2020
In 3Q2020, Penn National Gaming reported 223% increase in net income and a record Ebitda. Since March, its stock has increased by more than 1000% to reach $72.51 currently. It is likely that traders will buy near current levels as growth prospects for the company are strong. In regards to risk-management, traders might protect their portfolios against another slump by placing stop-losses below the 200-day moving average, depending on their risk aversion and outlook.