It may seem like an odd pick on a day when consumer
discretionary, high-beta and emerging markets stocks were all
taken to the woodshed, but a buying opportunity could be nearing
in the Market Vectors Gaming ETF (NYSE:
First, some disclaimers. Yes, BJK finished with a loss of 1.8
percent Wednesday. And yes, that extends the ETF's losses over
the past two weeks to 5.2 percent. Still, the ETF is up more than
13 percent year-to-date and that may imply investors that
eyeballing BJK today are late to the party. Maybe not.
BJK offers investors that do not want to stock pick
the best option for getting exposure to Macau
, the world's largest gambling hub. Las Vegas Sands (NYSE:
) sees Macau becoming a $100 billion market.
Nomura raised its 2017 revenue estimate for the only Chinese
territory where gambling is legal to $70 billion from $13
. In that note, Nomura boosted its price targets on Las Vegas,
Wynn Resorts (NASDAQ:
) and MGM International (NYSE:
Those U.S.-listed stocks combine for 19 percent of BJK's
weight, but the Macau stocks of each represent another 12.4
percent of the ETF's weight. Those weights underscore the notion
that BJK is an international ETF as the U.S. accounts for just
28.2 percent of the fund's weight.
In terms of exposure to Asian gambling growth, BJK has it.
China, Australia, Malayisa, South Korea and Japan combine for
over half the ETF's weight.
The international exposure comes with a rub that investors
need to be aware of in an environment where the U.S. dollar is
gaining strength: Currency exposure. As in BJK's currency
exposure is more than two-thirds non-U.S. dollar. For example,
the Hong Kong and Australian dollars, along with the euro and yen
combine for roughly 40 percent of BJK's country weight.
Additionally, gambling is perhaps the ultimate display of
discretionary spending, meaning BJK and its constituents need
sanguine market environments and cooperative economic data to
move higher. When that happens, which has for most of the past 12
months, BJK actually becomes a better idea than traditional
. For example, BJK has outperformed the Consumer Discretionary
Select Sector SPDR (NYSE:
) by 500 basis points over the past year.
One last thought about BJK: The ETF has just $61.1 million in
assets and although it has been
proven dozens of times
that an ETF's AUM total is not a valid predictor of returns, some
so-called experts lead investors to believe that all sub-$100
million ETFs are evil and illiquid.
In the case of BJK, the ETF rarely trades outside of a half
percent premium or discount to its net asset value,
according to issuer data
, indicating this is not an illiquid ETF. More importantly, as
BJK's one-year performance compared to XLY shows, ignoring small
ETFs just because they are small is a costly idea.
For more on ETFs, click
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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