I’ve talked a lot about sports gambling stocks in recent weeks, and there’s no question that it is now fully in motion. Everything points to a strong boom following the monumental decision by the Supreme Court on May 14 to allow states to legalize sports gambling.
There are multiple ways to profit, though they may not always be the best option. For example, betting a lot of money on your favorite football team in hopes of a quick double may sound exhilarating, but there are far smarter ways to invest in this trend. That’s where we rely on our extensive research to find the winners.
There are a number of players in the industry that can all succeed and take a big piece of the growing sports gambling pie. The most obvious would be the casinos that can easily add a sportsbook and attract gamblers who are already on their properties. Plus, technology is needed to power the gambling experience on land and on mobile. In the coming years, the majority of wagers will be placed via apps. Then there are the bookmakers that have been around for years overseas. And finally, we have the leagues and the teams themselves.
Because there are so many layers to the sports gambling trend, the best way to invest is to take a basket approach. Instead of limiting ourselves to one niche sector and one company, we can target multiple areas and pick the best name in each.
I have uncovered three stocks set to make money in some of the areas I just mentioned. Each is a standout name in its field and has huge potential as this trend gathers steam. Let’s talk about them now.
Sports Gambling Stocks to Bet the House On: Churchill Downs (CHDN)
Source: Lou Oms via Flickr
Whether you are a sports fan or not, I am sure you have heard of the Kentucky Derby, or “the fastest two minutes in sports.” And while you may have also heard that the race takes place at a track called Churchill Downs, you may not be familiar with the company of the same name.
Churchill Downs (NASDAQ:CHDN) owns or has an interest in four racetracks in four different states and a total of nine properties that have gaming operations. On those properties, CHDN operates nine casinos and four hotels.
The company’s current locations have it well positioned to capitalize on the first wave of states legalizing sports gambling. Two of its casinos are in Mississippi, and it already has an agreement to add a third. Mississippi is interesting because there will not be a lot of competition from its neighboring states, and with three properties there Churchill Downs is set up to be a leader.
Another one of the company’s important assets is its online wagering platform called TwinSpires, which is the largest legal online wagering operating in the United States. TwinSpires has become increasingly popular over the last decade, bringing in $87 million worth of bets in 2007 and growing that to $1.28 billion last year. That’s a blockbuster gain of 1,323% in 10 years. As sports gambling grows, I expect that number to keep climbing as well.
The combination of a well-recognized brand and strong technology makes for a great starting point as Churchill Downs begins a major move into sports gambling. That’s why I believe it should be a part of any sports gambling basket.
Sports Gambling Stocks to Bet the House On: The Stars Group (TSG)
The Stars Group (NASDAQ:TSG) is the largest online poker company in the world, best known for its PokerStars and Full Tilt brands. The company 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.
TSG’s dominance in the poker industry is one of its most compelling factors. Why? Loyalty. A gambler who is already comfortable with the company and technology behind PokerStars and Full Tilt is likely to stay with it, which makes it crucial as the company expands further into sports betting.
The Stars Group’s brands are well known and established, which tells us that the cross-selling of poker and sports betting will be seamless with current customers. This loyalty factor combined with the sheer size of TSG puts it in a dominant position in the sports betting industry.
I also like that the company recently announced two big mergers. The first was an 80% stake in CrownBet and William Hill Australia, which made it the third largest bookmaker in Australia and a major player in the world’s second largest online gaming market. Second, the company made a move into the world’s largest online gaming market — the UK — when it purchased Sky Betting & Gaming.
TSG is an established leader in online poker and in a very attractive position. The new frontier in sports gambling in the U.S. significantly boosts its potential, and I see big upside in the years ahead.
Sports Gambling Stocks to Bet the House On: William Hill (WIMHY)
This third company is a name that should sound familiar to those of you who have traveled to the United Kingdom. With over 2,300 sportsbooks throughout the region, the William Hill storefront is as familiar as a Starbucks.
William Hill (OTCMKTS:WIMHY) is one of the world’s leading betting and gaming companies. It currently holds 25% of the total sports betting market in the UK and Ireland. However, I’m more interested in its venture into the United States.
This effort actually began back in 2012 with the creation of William Hill U.S. It has operations in four states and more are now planned after the Supreme Court decision. Within the next few years, the William Hill name could be as popular with sports aficionados in the United States as it is across the pond.
This company’s presence is mobile is another key part of the story. Its sportsbook app was launched in 2012 and has since been downloaded more than 2.5 million times.
Similar to CHDN, WIMHY has a big advantage with its well-established app, name recognition and loyalty among gamblers. It’s not easy to put a number on those factors, but they will be key when it comes to differentiating the winners and losers in this long-term trend.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.
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