15 Best Gambling Stocks to Buy Now
In this article, we will take a detailed look at the 15 Best Gambling Stocks to Buy Now. You can skip our detailed analysis of the gambling industry, future outlook, sports betting activity and latest controversies to see 5 Best Gambling Stocks to Buy Now.
Gambling stocks are on investors' radar as casino and gaming companies begin to report earnings and industry analysts point to an expected recovery in Macau and Las Vegas in the coming months. In March, however, gross gaming revenue in Las Vegas Strip moderated on a year-over-year basis. For April, gambling investors expect strong data as earlier in the month, JPMorgan said in a report that it estimates gross gaming revenue (GGR) of about $1.5 billion in Macau for the first 21 days of April. JPMorgan said these numbers are in-line with expectations. In a separate note, Jefferies said that it was seeing Macau's activity normalizing and moving towards pre-COVID levels.
Expect Growth in High-End Segments of the Industry
Macquarie analyst Chad Beynon recently highlighted an interesting trend that could open new investing opportunities for investors keenly following the gambling industry and top companies like Las Vegas Sands Corp. (NYSE:LVS), MGM Resorts International (NYSE:MGM) and DraftKings Inc (NASDAQ:DKNG). Beynon said that while he expects casino revenues to moderate in the short term, he's anticipating growth in the high-end segment of the market, driven by activity in sports, entertainment and convention center events.
Economic Impact of Legalization of Online Gambling
A study titled The Potential Economic Impact of Legalizing iGaming on Casino Revenues in Five States published by Analysis Group talked in detail about the impact of legalization of online gambling in various states and analyzed how iGaming revenues are pushing the broader gambling industry revenues higher. The study, which conducted hundreds of interviews and processed datasets, showed that across six states where online gambling is already legal (New Jersey, Delaware, Pennsylvania, West Virginia, Michigan, and Connecticut), the total revenue of land-based casinos and online gaming in the most recent year surpassed the industry revenue recorded during pre-iGaming era by a whopping 46%. The study also shows that there is a huge potential in the online sports betting and gambling industry since the number of people participating in online gambling activities is still paltry when compared to physical gambling. The study cited an AG State Gambling Survey, in which 18.9% of respondents in the iGaming states (states where online gambling is legal) said that that they have participated in online gambling activity.
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Revenue Growth in Casinos, Sports Betting and Online Gambling in 2024
Industry reports show that Americans are flocking to casinos and gaming centers. The American Gaming Association said in a report that traditional and online casinos raked in a whopping $66.5 billion in revenue last year. Commercial gaming was off to a strong start in 2024. During the first two months of 2024, commercial gaming revenue came in at $11.46 billion, a 6.8% increase on a YoY basis. Commercial gaming industry's revenue saw a 9% jump in February this year. This was the 36th consecutive month of annual growth. Revenue from sports betting, casino games and iGaming in February came in at $5.61 billion, a new record. The AGA report noted that while digital gaming remains the fastest-growing segment in the casino and gambling space, traditional gaming activities like table games and slot machines still account for most of the revenue generated in the industry. For example, in February, slot machines and gaming tables accounted for about $4.13 billion of the total industry revenue generated. This was an increase of 4% on a YoY basis. Online gambling accounted for about $17 billion of the nearly $66 billion revenue generated in the commercial gaming industry last year.
Related Read: Biggest Gambling Companies By Revenue
Gambling Industry Outlook: Inflation Took a Toll But Executives See Growth Ahead
What's the sentiment in the gambling industry and what do gambling company CEOs expect to happen in the industry? The American Gaming Association partnered with Fitch Ratings to survey the industry and came up with key findings that give us the pulse of the industry. Gambling companies were also affected by a huge rise in inflation. However, growth remains strong and could improve once the inflation problems begin to recede. The report said:
"The Current Conditions Index indicates that real economic activity in the industry, as measured by gaming revenue, employment and employee wages and salaries, remains strong, but that the pace of growth has slowed relative to 2022 and 2021. The Current Conditions Index for the third quarter of 2023 was 100.6, which is consistent with real annualized growth of 0.6 percent. Because gaming revenues and employee wages are adjusted for inflation, the Current Conditions index was tempered by persistent high inflation through Q3 2023. The smoothed version (effectively a three-quarter weighted average) of the Current Conditions Index, which is reported with a two-quarter lag and is less impacted by short-term fluctuations stood at 102.8 in Q1 2023. This indicates that industry activity has been expanding in recent quarters at an annualized pace of approximately 2.8 percent and reflects real underlying growth even when controlling for the effects of inflation."
The report also said that the surveyed gaming executives expect their company balance sheets to improve. However, they expect revenue growth and hiring could slow down.
Las Vegas Sands CEO Robert Goldstein, during the company's Q1 earnings call, talked about his long-term expectations on business growth:
"I think it’s important to note that visitation still isn’t like it to be. Obviously, there’s still millions of people have not come versus the 2019 visitation numbers. We believe long-term visitation GGRs did grow, whether it be base or premium, we’ll get more than our fair share. And I think we’ve seen obviously, I’ll say the obvious, the promotional situation the market has changed and more people incent doing things. And once everyone starts playing that game, I believe that will resolve itself. We believe that assets will prevail. We believe London will be extraordinary asset much like it’s happening in Singapore. I think our results in Singapore reflect a fully developed program and the execution in Singapore shows what can be done.
We have the right kind of assets. What we have even done in Singapore the number is extraordinary. The same will happen in our business in Macao in time. As DGOs accelerate and they will, visitation accelerates and it will. We’ll continue to be margin-focused, even without focus, and get more than a fair share and assets will prevail over promotions from our perspective."
Read the full earnings call transcript here.
Sports Betting: Bans, Scandals and More
Sports betting companies are back in the limelight after some recent events yet again highlighted the industry's struggles to stay away from corruption and illegal betting. Last month, during the "March Madness" games, illegal sports betting watchdog US Integrity was busy as it flagged some wagering activities to relevant teams. The NBA banned Toronto Raptors forward Jontay Porter for life, saying the player bet on NBA games and disclosed important information to other gamblers. Media reports said Porter had an active FanDuel (owned by Flutter Entertainment) account before signing with the Raptors in December 2023. Flutter Entertainment PLC (NYSE:FLUT) went public earlier this year. We talked about the company's IPO and expectations in detail in one of our articles analyzing the industry dynamics.
In another scandal, Los Angeles Dodgers last month fired Ippei Mizuhara, the interpreter for pitcher Shohei Ohtani after reports of a $4.5 million wire transfer sent from Ohtani's bank account to a bookmaking operation.
Pixabay/Public Domain
Demand for a Ban on Prop Bets Grow Louder
Amid all this, calls for a ban on some forms of sports betting are rising. NCAA President Charlie Baker recently reiterated his demand to put a ban on prop bets— bets that allow gamblers to wager on statistics a player will accumulate during a game rather than the final score.
The sports betting industry in the US raked in about $10.92 billion revenue in 2023 which is 44.5% higher than the $7.56 billion from last year.
Jim Chanos Turns Bullish on the Gambling Industry
Despite all of this, the US gambling and sports betting industry is set for growth and looks in great shape, so great that short-selling giant Jim Chanos is taking a step back on his bearish bet against the industry and admitting the industry's potential. In December last year, Chanos said he's turning bullish on the gambling industry as he had earlier "underestimated" how bad US gamblers could be, referring to the potential profits casino stocks could make because of this. The Kynikos Associates founder had revealed his short position in DraftKings Inc (NASDAQ:DKNG) back in 2021 and kept betting against the stock for most of 2022, citing valuation concerns and huge spending. However, in July 2023, he closed his DraftKings Inc (NASDAQ:DKNG) short position.
Other than Chanos, long-only funds have also been taking interest in gambling stocks. For example, Performing Capital, which focuses on finding "misunderstood securities" that are in "value creation" mode, heavily invests in gaming companies. In its Q1'2023 investor letter, the company talked about the performance of its gaming stock picks and also gave a stock idea:
"At a sector level, Performing's biggest exposure is the gaming operators/sport franchises, with a 26% weighting. The letter details some of the holdings:
"We have investments in Golden Entertainment (GOEN), a Nevada gaming operator with both local and regional casinos, goliath MGM Resorts Int'/ (MGM), Las Vegas Sands (LVS), as well as small slot suppliers PlayAGS (AGS) and Everi Holdings (EVR/); the latter is also the #1 player in fintech kiosks (think cash machines) for casino operators. Finally, we have stakes in Kentucky Derby-owner Churchill Downs (CHON) and Madison Square Garden Sports (MSGS) - both of which are underpinned by very significant and rapidly appreciating "trophy" value franchises."
An Interesting Micro-Cap Stock Pick in the Gambling Industry
Performing Capital also talked about a stock in the gambling industry that proved to be a profitable investment down the road.
"The largest single holding in this basket is slot supplier PlayAGS. The micro-cap company (with a market capitalization of less than $200m) is on track to record results this year, and the market does not seem to appreciate this fact. Performing notes the shares are trading at just 5x adjusted AEBITDA, a factor it attributes to the exit of its former private equity owner and general concerns about the economy. Despite these concerns, "we believe continued strong results will translate to a big move in the stock."
Over the past one year, PlayAGS shares have gained about 72%.
Performance of Gambling Stocks in 2024
So far in 2024, gambling and casino stocks haven't been performing too well as investors remain in a wait-and-see mode and anticipate growth to come back to casinos and gaming centers, which took a beating amid inflation and rate hikes. VanEck Gaming ETF (NASDAQ:BJK) is down about 5% in 2024 through April 30, while Roundhill Sports Betting & iGaming ETF (BETZ) is down 0.88%.
Methodology
For this article, we scanned Insider Monkey's database of 933 hedge funds and chose top 15 gambling-related stocks with the highest number of hedge fund investors. Why is it important to pay attention to hedge fund sentiment? Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
15. Monarch Casino & Resort, Inc. (NASDAQ:MCRI)
Number of Hedge Fund Investors: 15
Reno, Nevada-based hotel and casino company Monarch Casino & Resort, Inc. (NASDAQ:MCRI) is one of the gambling stocks popular among hedge funds. A total of 15 hedge funds had stakes in the company as of the end of 2023.
14. Churchill Downs Incorporated (NASDAQ:CHDN)
Number of Hedge Fund Investors: 23
Racetracks, casinos and an online wagering company Churchill Downs Incorporated (NASDAQ:CHDN) is one of the best gambling stocks to buy according to hedge funds. Of the 23 funds that had stakes in the company, Citadel Investment Group of Ken Griffin was the biggest stakeholder with 860,052 shares.
The London Company SMID Cap Strategy made the following comment about Churchill Downs Incorporated (NASDAQ:CHDN) in its Q3 2023 investor letter:
“Churchill Downs Incorporated (NASDAQ:CHDN) – CHDN underperformed as 2Q recent results were a bit weaker than expected reflecting softness in the casino business and partially due to a temporary issue in the live racing business. We are not overly concerned about the issues that have pressured the stock, and we continue to have a very favorable view of the long-term outlook for CHDN. In our view, CHDN has a thoughtful and long-term oriented management team running a portfolio of highly cash-generative assets, with a very attractive set of investment opportunities.”
13. Light & Wonder, Inc. (NASDAQ:LNW)
Number of Hedge Fund Investors: 25
Formerly known as Scientific Games, Light & Wonder, Inc. (NASDAQ:LNW) makes lottery terminals, casino table products, casino management systems, gaming machines and other gambling-related equipment. It ranks 13th in our list of the best gambling stocks to buy now. A total of 25 hedge funds were long Light & Wonder, Inc. (NASDAQ:LNW) as of the end of 2023. The biggest stake in the company is owned by Fine Capital Partners of Debra Fine, worth $695 million.
12. Melco Resorts & Entertainment Limited (NASDAQ:MLCO)
Number of Hedge Fund Investors: 26
Melco Resorts & Entertainment Limited (NASDAQ:MLCO) shares jumped after Melco Resorts & Entertainment Limited (NASDAQ:MLCO) posted strong Q1 results. Revenue in the period jumped 55% year over year to $1.11 billion, driven by a recovery in inbound tourism to Macau.
Of the 933 funds in Insider Monkey's database, 26 funds had stakes in Melco Resorts as of the end of the first quarter.
11. Everi Holdings Inc (NYSE:EVRI)
Number of Hedge Fund Investors: 31
Las Vegas-based Everi Holdings Inc (NYSE:EVRI) makes slot machines and other equipment for casinos. Over the past one year Everi Holdings Inc (NYSE:EVRI) is down by about 30%. A total of 31 hedge funds tracked by Insider Monkey had stakes in EVRI.
Meridian Small Cap Growth Fund stated the following regarding Everi Holdings Inc. (NYSE:EVRI) in its fourth quarter 2023 investor letter:
“Everi Holdings Inc. (NYSE:EVRI) is a gaming technology company with two primary segments: manufacturing of hardware, content, and games, and a financial technology business, which provides cash access, loyalty programs, and compliance services. The stock declined during the quarter as incremental market share gains stalled in anticipation of a new product cycle. We maintain a positive view of the company for the stability of its overall installed base and believe that the new product cycle, which includes seven new cabinets and 86 new game themes, can rejuvenate growth. In addition, the financial technology segment, in our view, is an underappreciated asset and continues to grow and generate significant cash flow. The company’s currently high free cash flow yield and management’s stock buyback program support our long-term confidence in the company, and we took advantage of price weakness during the quarter to add to our position.”
10. Genius Sports Limited (NYSE:GENI)
Number of Hedge Fund Investors: 31
Sports data and technology company Genius Sports Limited (NYSE:GENI) is one of the top gambling and sports betting-related stocks to invest in according to hedge funds. A total of 31 hedge funds in Insider Monkey's database had stakes in the company as of the end of 2023.
In addition to GENI, hedge funds are also piling into Las Vegas Sands Corp. (NYSE:LVS), MGM Resorts International (NYSE:MGM) and DraftKings Inc (NASDAQ:DKNG).
9. PENN Entertainment, Inc. (NASDAQ:PENN)
Number of Hedge Fund Investors: 31
PENN Entertainment, Inc. (NASDAQ:PENN) shares are in the spotlight after David Einhorn's Greenlight Capital disclosed a stake in the company in a letter to investors in which David Einhorn made some important comments about PENN Entertainment, Inc. (NASDAQ:PENN) and gave some reasons behind the investment:
"PENN’s current enterprise value is just over $4.3 billion, and based on an 8-12x multiple of free cash flow, we value their land-based casinos between $4.3 billion and $7 billion. PENN also competes in online gaming, particularly sports betting, and we believe the market ascribes a substantial negative value to that effort. To be fair, the online segment has a checkered history. In 2020, PENN acquired a minority stake of Barstool Sports, and three years later agreed to purchase the rest, for a grand total of $551 million. That acquisition was a complete failure, and the company wound up abandoning the investment. It also spent $2 billion in 2021 to acquire Score Media and Gaming to establish a better online sports betting platform. Last year, it entered into a deal with ESPN to launch and operate ESPN BET. Successful sports betting franchises can have substantial value. DraftKings is the leader and is valued at over $20 billion. Through ESPN BET, PENN aspires to achieve top-three status in the industry. Given that the market is ascribing negative value to ESPN BET, it’s fair to say that after the Barstool fiasco, investors have serious doubts about the company’s strategy and management’s competence to execute. Were the market to credit PENN with merely 15% of DraftKings’ value, that segment alone would be worth $20 per share."
8. International Game Technology PLC (NYSE:IGT)
Number of Hedge Fund Investors: 33
UK-based International Game Technology PLC (NYSE:IGT) makes slot machines and other gaming technology. Of the 33 funds in Insider Monkey's database, Parsifal Capital Management of David Zorub was the biggest stakeholder of International Game Technology PLC (NYSE:IGT) with an $118 million stake.
In addition to IGT, hedge funds are also buying Las Vegas Sands Corp. (NYSE:LVS), MGM Resorts International (NYSE:MGM) and DraftKings Inc (NASDAQ:DKNG).
7. VICI Properties Inc (NYSE:VICI)
Number of Hedge Fund Investors: 33
Insider Monkey's database shows that casino and entertainment-focused REIT VICI Properties Inc. (NYSE:VICI) shares were bought by 33 hedge funds as of the end of the fourth quarter of 2023. The most notable stake in VICI Properties Inc. (NYSE:VICI) is owned by Citadel Investment Group of Ken Griffin, worth $269 million.
Here is what Baron Real Estate Income Fund has to say about VICI Properties Inc. (NYSE:VICI) in its Q2 2023 investor letter:
“We have slightly decreased our already modest exposure to the triple net gaming REIT VICI Properties Inc. (NYSE:VICI), an owner of quality gaming, hospitality, and entertainment properties. The company pays a 6% dividend that is well covered, has a strong track record of making accretive acquisitions, and has additional opportunities for growth in the years ahead.”
6. Boyd Gaming Corporation (NYSE:BYD)
Number of Hedge Fund Investors: 34
Gaming and hospitality company Boyd Gaming Corporation (NYSE:BYD) is one of the best gambling stocks to buy according to hedge funds. Out of the 34 funds having stakes in the company, John W. Rogers' Ariel Investments had the biggest stake in the company, valued at $192 million.
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Disclosure: None. 15 Best Gambling Stocks to Buy Now is originally published on Insider Monkey.