March Madness , or the 2022 National Collegiate Athletic Association (NCAA) Division I Basketball Tournaments, kicked off earlier this week with Selection Sunday. Historically, the tournament has been a money-maker for media networks, advertisers and sports betting companies.
Analysts point out this year’s March Madness offers unprecedented potential thanks to the increased number of states that legalized sports betting. According to the American Gaming Association (AGA), more than 50 million Americans will wager over $10 billion, making this year’s March Madness the biggest modern sporting event. However, only around 3% of that amount will be wagered legally.
Amid the volatility in broader markets, Wall Street is taking a closer look at shares of companies that could benefit from this ever-popular basketball tournament. With that said, here are three of the best stocks to buy ahead of tonight’s First Four tip-off:
March Madness Stocks to Buy: AT&T (T)
- 52-Week Range: $22.02– $33.88
- Dividend Yield: 9.03%
First on today’s list is AT&T—one of the three premier sponsors, or the corporate champions of the NCAA tournament. The telecoms giant will be presenting “The Catch Up”, “Fast Break”, and “Condensed Games” throughout the tourney.
Meanwhile, Turner Sports, a division of WarnerMedia and AT&T, holds rights to March Madness games alongside CBS — part of Paramount Global (NASDAQ:PARA), Turner has sold all linear and digital inventory for the tournament, generating record ad revenue.
Regular InvestorPlace.com readers would be well aware that AT&T is in the process of spinning off its WarnerMedia segment. Afterwards, management aims to cut its dividend in half to around 4.5% to pay off its debts.
T stock sank to a 52-week low of $22.02 on Dec. 15, 2021. It is trading around $23, down almost 9% year-to-date (YTD). Shares have a favorable valuation at 7.63 times forward earnings and 1.02 times trailing sales. The 12-month price expectation for T stock is currently $29 a share.
- 52-Week Range: $50.17 – $63.02
- Dividend Yield: 3.02%
Non-alcoholic drinks giant Coca-Cola is another premier sponsor of March Madness. Although the basketball tournament should create traction for the company, Coca-Cola has also been in the news regarding the steps it is taking in Russia. In early March, management joined scores of U.S. and global businesses that have suspended operations there following the country’s invasion of Ukraine.
Analysts debate how earnings could be affected by this decision. Yet, for passive-income seekers, KO shares are among the top names to own. Coca-Cola has been paying dividends for almost six decades, and currently offers a dividend yield of 3.0%. In addition, based on its positive outlook for 2022, the board will likely resume share repurchases of up to $500 million for the year.
After the release of Q4 earnings on March 3, shares of the iconic beverage maker jumped to an all-time high (ATH) of $63.02. Yet the stock remains is down almost 2% YTD, currently trading around $58.
KO shares trade at 25.75x forward earnings. The 12-month median price forecast for Coca-Cola shares is at $67. Potential investors might wait for a pullback toward $55 before hitting the buy button.
March Madness Stocks to Buy: Roundhill Sports Betting & iGaming ETF (BETZ)
- 52-Week Range: $17.77– $33.26
- Expense Ratio: 0.75%
Our final recommendation is an exchange-traded fund (ETF), namely the Roundhill Sports Betting & iGaming ETF. It provides exposure to companies engaged in the sports betting and i-gaming industries. The fund began trading in June 2020. The firm’s industry newsletter is recommended reading for any investor interested in the sector.
BETZ, which tracks the Roundhill Sports Betting & iGaming Index, currently has 44 holdings. In terms of sectoral allocations, we see sportsbooks with 27.4%, followed by technology (25.9%) and iGaming (24.7%). The top 10 stocks in the fund account for almost 45% of $197 million net assets.
Leading holdings in the fund include Penn National Gaming (NASDAQ:PENN) [5.66% of assets], Entain (OTCMKTS:GMVHY) [4.75%], Kambi (OTCMKTS:KMBIF) [4.73%], Kindred (OTCMKTS:KNDGF) [4.57%], DraftKings (NASDAQ:DKNG) [4.25%] and Flutter Entertainment (OTCMKTS:PDYPY) [4.2%].
The thematic ETF is currently trading at around $19, down almost 24% YTD. It hit a 52-week low of $17.77 on March 8. Given the recent decline in price, potential investors could consider buying around the current level.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.