Basket March Madness Gains With These ETFs
The 2018 National Collegiate Athletic Association (NCAA) Division I Men's Basketball Tournament kicked off last week and “March Madness” is spreading among Americans. Millions are seeking to capitalize on the opportunity by enthusiastically filling in the brackets.
Though the championship has diverted a large number of Americans from the stock market and dried up trading volumes, it usually leads to a buying frenzy and strong stock gains. The year 2018 seems no different as the bull market turned nine on Mar 9 and is extending its rally driven by strong corporate earnings, massive tax cut policies and solid economic growth at home and abroad (read: 9 ETFs Winners From 9-Year Bull Run).
Being the biggest modern sporting event in the United States, the championship is a money-spinner for media networks (TV, digital and social media) and advertisers, attracting billions of revenues in three weeks.
What’s on A Roll?
The two TV media conglomerates – CBS Corporation CBS and Turner Sports – continued to score the highest revenues from the event by broadcasting through four networks, CBS, TNT, TBS, and truTV. In fact, CBS turned out to be the winner in the first round of the tournament with 4.98 million viewers, up 11% from last year, according to Nielsen final live-plus-same day numbers. Total viewership for the tournament across all linear and digital platforms increased to 8.6 million, up from 8.2 million last year.
Per Kantar Media, the NCAA championship generated about $1.285 billion in total advertising revenues in 2017, up 3.3% from 2016. As such, the event only trails $1.547 revenues generated from the NFL playoffs.
All the games will also stream on the NCAA’s March Madness site and via “The NCAA March Madness Live App,” which is available for many devices, including iOS, Android, Roku and Apple TV. Further, social media sites like Facebook FB, Twitter TWTR, Instagram, and Snapchat SNAP are attracting fans to their respective platforms via media deals with NCAA or Turner Sports (read: Log In to Social Media ETFs on Twitter's Strength).
Apart from media, the contest is a boon to the casino industry. According to the American Gaming Association – a national trade group that represents the casino industry – March Madness could attract $10 billion to the industry. Only 3% will be wagered legally through Nevada sports books while the remaining will be placed with offshore sportsbooks and local bookmakers.
Sponsors invest millions in advertising and marketing for March Madness. Capital One COF is one of the biggest sponsors again this year. AT&T T and Coca-Cola KO are the two other corporate champion sponsors. These companies are also expected to gain from the tournament.
ETFs to Bet On
As the contest is a high-seeded top-line driver for sponsors, media and networking players, as well as casino industries, investors can basket some gains by jumping into the ETFs in these spaces. Any of the products mentioned below could make for an exciting March Madness play.
PowerShares Dynamic Media Portfolio PBS
This fund tracks the Dynamic Media Intellidex Index and seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria. The approach results in a small basket of 29 media stocks with none of the firms holding more than 5.75% share. Within the media sector, Internet & mobile applications take the top spot at 30% while movies & entertainments, cable & satellite and publishing round off the top four. The product has amassed $58 million in its asset base while trading in a light volume of about 27,000 shares a day. It charges 63 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Disney-Fox Deal to Change Media Industry: ETF in Focus).
Global X Social Media ETF SOCL
This fund provides access to social media companies around the world by tracking the Solactive Social Media Total Return Index. It holds 32 securities in its basket with double-digit exposure to the top two firms – Twitter and Tencent. Other firms hold less than 8.9% share. In terms of country exposure, U.S. firms take about half of the portfolio, followed by China (32%) and Russia (8%). The fund has $234.1 million in AUM and average daily volume of about 78,000 shares. Expense ratio comes in at 0.65%. SOCL has a Zacks ETF Rank #3 with a High risk outlook (read: Stocks & ETFs That Could Win From Oscars 2018).
VanEck Vectors Gaming ETF BJK
This ETF provides investors exposure to companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology and gaming equipment. It follows the MVIS Global Gaming Index, holding 43 securities in its basket. It is moderately concentrated across components with each holding less than 9.3% of the assets. In terms of country exposure, United States takes the top spot at 40.9%, followed by China (18.4%) and Australia (12.8%). It has been overlooked by investors as depicted by AUM of $54.9 million and average daily volume of roughly 15,000 shares.
PowerShares Dynamic Leisure and Entertainment Fund PEJ
This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 30 U.S. leisure and entertainment companies. It is pretty well spread out across components, with each holding less than 5.5% share. Though casinos & gaming and hotels & leisure facilities dominate the fund’s portfolio with 26% share each, airlines and restaurants round off the top four. The ETF has amassed $106 million in its asset base and trades in a light volume of 16,000 shares a day on average. It charges 61 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (see: all the Consumer Discretionary ETFs here).
Pro Sports Sponsors ETF FANZ
This fund tracks the ProSports Sponsors Index, an equal-weighted index that measures the performance of companies which are official sponsors of the major professional football, baseball, hockey and basketball leagues in the United States or national sports broadcasters with rights agreements with such leagues. It holds 69 securities in its basket and charges 69 bps in annual fees. The ETF has accumulated $5.6 million in its asset base and trades in small average daily volume of 2,000 shares.
Bottom Line
These products are expected to benefit from the March Madness and the huge revenue generation scope for media, advertisers and casinos.
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CBS Corporation (CBS) : Free Stock Analysis Report
Facebook, Inc. (FB) : Free Stock Analysis Report
Twitter, Inc. (TWTR) : Free Stock Analysis Report
Snap Inc. (SNAP) : Free Stock Analysis Report
AT&T Inc. (T) : Free Stock Analysis Report
Coca-Cola Company (The) (KO) : Free Stock Analysis Report
Capital One Financial Corporation (COF) : Free Stock Analysis Report
GLBL-X SOCL MDA (SOCL): ETF Research Reports
PWRSH-DYN MEDIA (PBS): ETF Research Reports
PACIFIC (EX: JA (PEJ): ETF Research Reports
VANECK-GAMING (BJK): ETF Research Reports
PROSPT-SPONSORS (FANZ): ETF Research Reports
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