There’s a new opportunity for investors to profit from sports betting after Monday’s Supreme Court decision.
Let’s explore the issue, starting with a chart. Please click here for an annotated chart of Penn National Gaming PENN, +2.58% Penn National Gaming operates a number of casinos and race tracks in the U.S.
Please observe the following from the chart:
• The stock broke out on news of the Supreme Court overturning a ban on sports betting.
• The breakout was on heavy volume.
• Previously, as shown on the chart, the stock gapped open on the news of an acquisition approval.
• The gap open was on heavy volume.
• The relative strength index (RSI) shows that the stock is very overbought. The RSI pattern indicates that, perhaps after a pullback, the stock may go higher.
Read: The U.S. market for sports betting far smaller than the $150 billion proponents claim
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The casino advantage
Each state will have its own laws governing sports betting. If states say that sports betting has to have a physical nexus, Penn National Gaming has a significant advantage because of its many locations across the country. The other stocks to consider are Boyd Gaming BYD, +0.89% and Caesars Entertainment CZR, +1.59% Race-track operator Churchill Downs CHDN, +1.85% will also benefit.
Casino risk
The risk is if states allow online betting without any physical nexus, regional casinos and race tracks may not benefit in a big way. In this case, the stock to consider is Stars Group TSG, -1.92% that is big in online sports betting.
Nevada casinos
Wynn Resorts WYNN, -0.83% and Las Vegas Sands LVS, +0.26% will not benefit because they do not have a big presence in the U.S. outside Nevada. MGM Resorts MGM, -0.54% may benefit from online betting.
Technology providers
Technology providers such as International Game Technology IGT, +2.25% and Scientific Games SGMS, -0.08% are likely to benefit. Scientific Games is especially well-situated.
What to do now
At The Arora Report, we have taken one position to profit from sports betting and plan to add more in the near future. There are several additional opportunities other than those mentioned above, including an ETF. There are significant profits to be made, but investors need to be nimble as state regulations emerge. Furthermore, investors need good risk control. The best risk control is proper position sizing and diversification.
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at Nigam@TheAroraReport.com.