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Keeping Score

Gaming stocks have outperformed the market over the past year

Keeping Score

The old expression that it’s always darkest before the dawn would appear to apply to Everi.

There was overall gloom over the hybrid casino payments-slot company at the end of last year. But not by the end of the first half of this year. As of June 30, Everi stock had shot up 235 percent, making it the fastest grower among all the gaming companies tracked by Fantini Research.

Everi wasn’t alone. Gaming stocks generally outperform the broader markets, as can be seen below:

Fantini Gaming Indices
North America     +21.41 percent
World                   +35.38
Interactive           +8.05

Broad Indices
Dow Jones            +8.03 percent
S&P 500               +8.24
NASDAQ 6            +14.07
Hang Seng            +17.11

Big jumps are to be expected at small companies, such as MyBet and Newgioco, which have gaming operations in Europe.

And Golden Entertainment, which exploded 71 percent over the six months and now sports a market cap of a half-billion dollars, meaning it no longer is a micro cap by gaming industry standards.

But the big gains came at big companies, too. Consider:

  • Scientific Games and Aristocrat, two of the largest supplier companies, jumped 86 percent and 46 percent, respectively.
  • Penn National, the large American regional casino operator, soared 55 percent. Pinnacle leaped 36 percent.
  • Macau-focused Wynn, Wynn Macau, Melco Resorts and Galaxy Entertainment jumped 48, 46, 41 and 40 percent, respectively.
  • Caesars jumped 41 percent.

Here’s a sampling of gaming stocks in the first half of the year:

Ten Best Performers         % Change
Everi                                  +235.48 percent
MyBet                                +180.00
Newgioco                           +172.50
Melco Philippines              +131.22
Scientific Games                +86.43
Golden Entertainment       +71.02
Penn                                    +55.18
Inspired                              +53.85
Wynn Macau                      +47.81
Wynn                                  +45.97

Largest U.S. Casino Operators
Wynn Resorts                     +45.97 percent
Caesars Entertainment      +40.94
Las Vegas Sands                 +15.45
MGM Resorts                      +8.53

U.S. Regional Casino Operators
Golden Entertainment       +71.02 percent
Penn National                     +55.18
Pinnacle                               +36.28
Boyd                                     +23.00
Churchill Downs                  +21.83
Eldorado                               +17.99

Major Suppliers
Everi                                     +235.48 percent
Scientific Games                  +86.43
Aristocrat                              +45.55
IGT                                        -26.51

Macau Casino Operators
Wynn Macau                        +47.81 percent
Melco Resorts                      +41.19
Galaxy Entertainment         +40.24
SJM                                       +35.36
MGM China                          +7.86
Sands China                         +6.08

Sports Betting Buzz

The U.S. Supreme Court recently dropped something of a bombshell in agreeing to hear New Jersey’s court appeal aimed at legalizing sports betting in the Garden State.

The decision raises a lot of questions, such as whether the Supreme Court will stand with the federal ban on sports betting, nibble away at narrow legal issues or broadly decide that the federal ban is unconstitutional.

The possibilities could range from initially New Jersey alone being allowed to have sports betting by, effectively, exploiting a loophole in the federal ban, to leading other states to challenge the federal ban in new court cases, to giving Congress guidance on a new federal law, to stating that sports betting is a states’ rights issue.

If the last possibility occurs, the floodgates would open. Already, a number of states have considered legislation to legalize sports betting if the federal ban goes away.

The question for investors, then, is who would benefit?

Assuming a state-by-state solution, beneficiaries, obviously, would differ state by state.

However, two groups would almost surely stand to benefit:

1.  Those companies already in the sports betting business.
2.  Casino operators.

Existing Sports Betting Operators

Among those already in the business, two London-listed companies stand out: William Hill (WMH) and PaddyPowerBetfair (PPB).

William Hill has clearly positioned itself to hit the ground running anywhere sports betting becomes legal.

Like William Hill, PaddyPowerBetfair is a major sports betting operator in the British Isles with an American presence, TVG account wagering service.

Other sports betting companies could benefit, including London-listed Sportech, which operates the OTBs in Connecticut, or Ladbrokes, which could jump into the U.S.

However, WMH and PPB appear the best positioned to take advantage of what could be a huge new market for them.

Casino Operators

With a presence in so many states, casinos are in position to lobby legislatures to limit sports betting licenses to them, at the casinos and through satellite operations to cover a state’s entire geography.

Big companies like Caesars, MGM Resorts and Boyd could operate their own sports books regionally just like they do now in Nevada.

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