If someone could bet a large sum of money in late 2019 that the novel coronavirus alter global conditions would change so dramatically, the return would have been astronomical. And while there are ways to bet on unusual things with little odds of profiting, the gambling stocks below offer high odds of performing well in 2021.
A ReportLinker report on the global gambling industry predicts growth:
- Global gambling market to reach $647.9 billion by 2027 even accounting for the pandemic.
- Lotteries are projected to post a 9.9% compound annual growth rate and total $209.9 billion by 2027.
- The casino segment’s CAGR, citing the pandemic, was revised to 2%.
The gambling resorts that follow attract thousands of visitors each year. Traveling is expected to rebound – entertainment too. And, the stakes are high that adding quality gambling stocks to your portfolio could mean a nice bull run in 2021.
With economic recovery and an increase in consumer spending, these exchange-traded funds and companies could perform well next year:
- Roundhill Sports Betting & iGaming ETF (NYSEARCA:BETZ)
- VanEck Vectors Gaming ETF (NASDAQ:BJK)
- MGM Resorts International (NYSE:MGM)
- Las Vegas Sands (NYSE:LVS)
Gambling Stocks: Roundhill Sports Betting & iGaming ETF (BETZ)
This sports betting ETF includes gambling stocks focused on the sports betting & iGaming industries. But the good news is that it has a global view and not just U.S. stocks.
As of late December 2020, the assets under management were $204 million and the expense ratio was 0.75%. This ratio is considered neither too high, nor too low.
This is a balanced ETF with 38 holdings, including Penn National Gaming (NASDAQ:PENN) and DraftKings (NASDAQ:DKNG).
While the U.S. is the largest country with net assets exposure, this fund offers plenty of diversification with the rest assets targeting Europe and Asia. There is a preference for mid-cap stocks, which represent 51.4% of the net assets. Assets are rebalanced quarterly.
The net asset value increased by 39% since its inception in June 2020.
VanEck Vectors Gaming ETF (BJK)
According to the fund description, this gambling ETF “seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Gaming Index, which is intended to track the overall performance of companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology, and gaming equipment.”
As of late December 2020, the total net assets were $75.7 million, and the net expenses ratio was 0.66%. This ETF can add diversification investing in gambling stocks with 42 holdings. The U.S. is the country with the largest weighting at 46.92%. Other countries represented include Australia and China. With a year-to-date performance of net asset value of 11.59%, the overall performance is considered attractive.
Both of these ETFs offer the benefit of investing in gambling stocks without focusing directly on stock analysis, suitable for passive investing. For investors with a more active style of investing, the following gambling stocks offer attractive risk-reward potential in 2021.
Gambling Stocks: MGM Resorts International (MGM)
MGM Resorts International has casino resorts in the United States and Macau offering a variety of gaming, hotel, and entertainment amenities. It was cited in another InvestorPlace article: 3 Hotel Stocks That Are the Biggest Threats to Airbnb.
Looking at its year-to-date performance of -5.95% seems to be an underperforming stock. But the stock has an impressive rally of about +44% in the past three months. It seems cheap too, with a P/E Ratio (TTM) of 10.62.
There are two positive factors that can drive growth for MGM stock. MGM became the sports betting partner of the Philadelphia 76ers NBA team. Also, sports betting likely will be a major growth driver for the industry in several states.
The company rebound seems in progress. The net margin of the stock was 15.86% in 2019 and in 2020, for the trailing 12 months, reached 21.47% amid the pandemic.
Las Vegas Sands (LVS)
Las Vegas Sands operates resorts in Asia and the United States with gaming and entertainment amenities. The pandemic distorted its financial performance significantly in 2020.
Revenue, operating income and profitability declined and the company witnessed losses. From a valuation perspective, the stock seems expensive now, but this is due to the abnormal economy.
I am optimistic that in 2021 LVS stock – down almost 15% in 2020 – could rebound and perform well. Why? If we consider the year 2020 as an outlier to the stock’s performance, its trend in other years was consistent. This applies to profitability, revenue growth, and even to the dividend yield. All were notable. And this consistent financial performance may well return as the odds are rather high.
On the date of publication, Stavros Georgiadis, CFA, did not have (either directly or indirectly) any positions in the securities mentioned in this article.
