In this article we will take a look at the 10 best sports betting stocks to buy now. You can skip our detailed analysis of the sports betting industry’s outlook for 2021 and some of the major growth catalysts for these stocks and go directly to 5 Best Sports Betting Stocks to Buy Now.
Sports betting is one of the fastest-growing industries in the world. Millions of people are starting to use sports betting websites and mobile apps for wagering. Data shows that sports betting revenue in the U.S. is expected to reach over $8 billion by 2025. New Jersey is the biggest sports betting market in the U.S. outside Nevada. Total sports betting revenue in New Jersey jumped 57% YoY in August 2020 to reach $39.5 million. The historic ruling by the U.S. Supreme court to legalize sports betting also resulted in a significant rise in sports betting as casino companies and online gaming platforms launched their sports betting platforms across the country. The District of Columbia and 22 states have legalized sports wagering. Americans are beginning to use sports betting apps and websites both professionally and for entertainment purposes. In 2020, about 33 million Americans said they planned to gamble on the NFL, according to a survey by American Gaming Association. Since the 2018 Supreme Court ruling, over $20 billion has been bet with U.S. sports books.
Best Sports Betting Stocks to Buy Now
Another key area seeing growth due to the rise of sports betting is sports data. As gaming companies become more digitized, they need data to analyze user trends. According to a report by Deloitte, the sports analytics industry is expected to reach nearly $4 billion by 2023. The report mentioned the NCAA’s 10-year contract with a U.K.-based technology company to collect and distribute intercollegiate sports data
Sports betting has received positive reception in the traditional sports industry. There has been an uptick in partnerships and deals between sports betting apps, players and entertainment companies. Last year, gaming technology company Sportech PLC partnered with French gaming operator ZeTurf to deliver alternative options for betting on French racing. Similarly, a major sports betting company William Hill in February 2020 entered a partnership with Grand Traverse Band of Ottawa and Chippewa Indians (GTB) for exclusively providing online sports betting and online casino gaming throughout Michigan.
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While choosing stocks to invest in, you should perform detailed research amid the increasing volatility in the financial markets, which is making it harder even for the smart money to sustain profits. The hedge fund industry that once used to post sterling gains is also feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
With this context and industry outlook in mind, let’s start our list of 10 best sports betting stocks to buy now.
10.Penn National Gaming, Inc. (NASDAQ: PENN)
Number of Hedge Fund Holders: 41
Penn National ranks is one of the 10 best sports betting stocks to buy now. The company operates several gaming and racing properties in 19 states. The company offers sports betting at its properties in Colorado, Indiana, Iowa, Michigan, Mississippi, Pennsylvania and West Virginia. In a recent interview with CNBC, the company’s CEO Jay Snowden said that the company is seeing “incredible” revenue growth and volumes amid the COVID-19 rollout. He said that Penn National Gaming’s March business recovery was extremely strong.
As of the end of the fourth quarter of 2020, Whale Rock Capital Management owns 5.5 million shares of PENN worth $473.98 million. PENN accounts for 3.15% of Whale Rock Capital’s total portfolio.
In their Q3 2020 investor letter, Alger Mid Cap Focus Fund highlighted a few stocks and Penn National Gaming Inc (NASDAQ:PENN) is one of them. Here is what Alger Mid Cap Focus Fund said:
“Penn National operates 40 properties (casinos and racetracks) across 20 states. In February. Penn National purchased a 36% interest in Barstool Sports, an online sports media company with 66 million monthly active users. Penn National is using Barstool Sports as the brand of its digital strategy and retains 100% of the sports betting and online casino (iGaming) proceeds in the relationship. Traditional brick¬and-mortar casino gambling in the U.S. is not a growth industry: however, two unique growth areas exist for casino operators: online sports betting (OSB) and iGaming. More states are considering legalization of OSB and iGaming due to Covid¬19-related budget shortfalls, as gambling can raise substantial tax revenue. Importantly, data shows that sports betting and online casinos do not cannibalize brick-and-mortar casino revenues. Additionally, gaming companies must have a physical presence within the states where they seek to have online gambling and sports betting legalized, so Penn National’s brick-and-mortar facilities give the company an advantage in this area. Shares of Penn National performed strongly during the third quarter in response to the company’s brick-and-mortar properties recently generating higher margins compared to pre-Covid-19 levels. a result of the company cutting costs and increased customer spending. Investors also responded favorably to Barstool’s September launch of its Sportsbook app in Pennsylvania. Additionally. sports betting and online gaming levels have reached record highs in numerous states.”
9. DraftKings Inc. (NASDAQ: DKNG)
Number of Hedge Fund Holders: 48
DraftKings is one of the best sports betting stocks to buy now. The Boston-based company offers bets on daily and weekly fantasy sports in five major American sports — MLB, the NHL, the NFL, the NBA and the PGA. The company has over 4 million registered users for its DFS platform. Recently, Loop Capital Markets gave bullish comments about DraftKings stock, citing strength in the New York sports betting market. The firm said that based on the New Jersey’s iGaming GGR per capita in 2020, online gaming opportunity could double in New York to roughly $3 billion.
According to our database, the number of DKNG’s long hedge funds positions increased at the end of the fourth quarter of 2020. There were 48 hedge funds that hold a position in DKNG compared to 43 funds in the third quarter. The biggest stakeholder of the company is Tybourne Capital Management, with 1.9 million shares, worth $89.8 million.
Carillon Tower Advisers, in their Q4 2020 investor letter, mentioned DraftKings Inc. (NASDAQ: DKNG) and emphasized their views on the company. Here is what Carillon Tower Advisers has to say about DraftKings Inc. in their Q4 2020 investor letter:
“DraftKings is a digital sports entertainment and gaming company that provides online and retail sports wagering, online daily fantasy contests, and online casino games. The firm’s shares underperformed, despite reporting strong earnings and outlook with its most recent quarterly update. The stock pulled back meaningfully from its highs in October as it needed to work through a notable share lockup expiry. We remain bullish on the future growth prospects of the online sports gambling industry and believe DraftKings is positioned exceptionally well to capitalize on what appears to be a long-term secular trend.”
8. GAN Limited (NASDAQ: GAN)
Number of Hedge Fund Holders: 22
GAN is a technology company whose platform allows users to initiate their sports bets. The company offers Play-For-Fun Simulated Gaming, Real Money iCasino, and Sportsbook experiences. The company’s SaaS model makes it a solid pick to profit from the ongoing digitization of the casino industry. GAN’s services are used by commercial casino operators. GAN monetizes its services by taking a percentage of the net gaming revenues generated on its platform. The company recently gave upbeat guidance for 2021, expecting revenue of $100 million to $105 million in the year, compared to $98.57 million consensus estimate.
As of the end of the fourth quarter, there were 22 hedge funds in Insider Monkey’s database that held stakes in GAN Limited, compared to 7 funds in the third quarter. Driehaus Capital, with 1.01 million shares of GAN, is the biggest stakeholder in the company.
Symmetry Invest, in their Q4 2020 investor letter, said the following about GAN:
“We have been following GAN for a long time while it was a small AIM-listed stock. The company had gained a strong market position in New Jersey when the state opened up the market for online casinos in 2014, and also exhibited solid growth and a compelling market position in Italy. But at the same time, it was loss-making, had to constantly raise new capital and the growth was not “overwhelming”. We still spent time familiarizing ourselves with the company, as we could see that their market position in the US could become a strength in due time. The first crucial news came in mid-2018 when the PASPA rule was removed, and all states in the US were free to self-regulate sports betting and casino. This presented itself a clear opportunity for GAN, but as they still did not have a sports betting product, we bided our time. When Pennsylvania, in 2019, also allowed sports betting and casino, and we saw how Fanduel/Betfair started to gain a strong market position building on GAN’s platform, we initiated a purchase. At the time the stock was still only increasing slightly, and the financials were still not good (it takes time for leading KPIs to affect the numbers). We continued to buy in light of willingness from more states to open up, and GAN signing on more and more customers. In May 2020, GAN chose to substitute the small AIM exchange for Nasdaq in the US. As reported revenue began to rise +100% YoY and margins followed, the stock reacted strongly. The stock thus ended up rising 1.000% from mid-2018 to mid-2020. Even during 2019, one could still buy the stock for 3-8 USD (the stock was listed in the UK and in pence at the time). Today it is traded for approximately 20 USD.
GAN is therefore a great example of how you can follow a company for a long time, do your analysis, and be ready to buy in when the business model is facing the crucial inflection point.”
7. Scientific Games Corporation (NASDAQ: SGMS)
Number of Hedge Fund Holders: 23
Scientific Games ranks 7th on the list of 10 best sports betting stocks to buy now. The company offers technology platform for gaming and operates several sports betting and entertainment segments, including lottery and interactive sports. It provides casino management systems, game content, table game products and services, instant and draw-based lottery games and lottery services. Union Gaming’s John DeCree gave bullish comments about the stock recently, citing a “deleveraging” that is taking place at the company which is expected to pave way for a potential strategic transaction. The analyst upped his price target on the stock to $65 from $50.
A total of 23 hedge funds tracked by Insider Monkey were bullish SGMS at the end of the fourth quarter, down from 25 funds a quarter earlier.
6. Churchill Downs Incorporated (NASDAQ: CHDN)
Number of Hedge Fund Holders: 25
Churchill Downs is one of the oldest sports betting companies in the world. The company started in 1875 with one racetrack in Louisville, Kentucky. Today, it has a market cap of $8.76 billion, and owns online sports betting platforms, racetracks and casinos. The company recently priced addition $200 million of its 4.75% senior notes due 2028 at 103.25% of the principal amount. It also priced $300 million senior secured Term Loan B due 2028 at LIBOR plus 200 basis points.
The company is also getting the attention of the smart money, as 25 hedge funds tracked by Insider Monkey reported owning stakes in the company at the end of the fourth quarter, down from 28 funds a quarter earlier.
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Disclosure: None. 10 Best Sports Betting Stocks to Buy Now is originally published on Insider Monkey.
