As a lover of both sports and investing, I have been following gambling and sports-related stocks for years. I knew (or at least hoped) that one day the federal ban would be abolished, so I already had a long watch list of companies that would benefit from such a scenario.
Well, that hunch is finally paying off as the monumental decision by the Supreme Court to allow states to legalize sports gambling has created a new investment opportunity.
To get an idea of just how big it can be, take a look at the numbers out of New Jersey. As a major player in the fight to change the 1992 federal law that prohibited nearly every state from allowing sports betting, the Garden State was one of the first to offer wagers on sporting events last month.
Through the last two weeks of June, New Jersey reported that $16 million was wagered on games, with betting facilities capturing $3.5 million in gross revenue. There were only three betting parlors open at the time, with the third open for just a couple of days at the end of the month. The state expects to approve a few more facilities as well as an online casino where sports wagers can be made. With that in place, the amount wagered in New Jersey alone could reach up to $50 million a month – that’s $600 million annually.
To put that in perspective, consider that an estimated $150 billion was bet illegally across the country in 2017… about 30 times more than the $4.87 billion bet legally in Las Vegas. If you can grasp the significance of those numbers, you’re well on your way to making a fortune in the Great American Sports Betting Boom.
Big Brands, Big Potential
That brings me to The Stars Group (TSG). It is the largest online poker company in the world, best known for its PokerStars and Full Tilt gambling brands. TSG also boasts one of the fastest growing online casinos and sportsbooks – it brought in revenue of more than $420 million in just four years. As the world’s largest economy shifts toward legalized sports betting, this number could soar well into the billions.
One of the reasons I like this company so much is that it is clearly run by smart people, as evidenced by two major mergers this year. The first was an 80% stake in CrownBet and William Hill Australia, and the $435 million cash and stock transaction instantly made the company a major player in the world’s second-largest online gaming market. TSG is now the third largest bookmaker in Australia
It also made a move into the world’s largest online gaming market – the UK. In a recently-closed deal, TSG purchased Sky Betting & Gaming, the fastest-growing established online gaming operator in the UK, for $4.7 billion in cash and stock.
The fact that Sky Betting represents the fourth-most valuable sports brand in the world will also help with customer acquisition, especially as it also has the kind of loyalty that is key to expanding into new areas. Currently, 58% of sports betting customers use Sky Betting & Gaming exclusively.
TSG’s executives were ahead of the game with these deals and put the company in a strong position in the sports betting world even before the Supreme Court made its ruling. Those bets – pun intended – will pay off in the years ahead as casino operators and related technology companies fight for the $150 billion that’s quickly making its way into the market.
TSG is an established leader in online poker and is in a very attractive position as the online gaming market is set for explosive growth. It was a $42 billion global industry last year, and that figure was expected to increase to $57 billion by 2021. With sports betting becoming legal across the United States, we could easily see another $10-$20 billion added to that number. TSG is my top pick to profit from it.
