The NCAA Tournament starts, though chances are most folks that
own a computer or television know that already, even they are not
big basketball fans. "March Madness," as it is often referred, is
one of the biggest sporting events in the U.S. Perhaps part of
the reason for that is because, unlike the Super Bowl, the NCAA
is not over and done with in a single day. Rather, it takes more
than weeks for the field of 68 to be whittled down to two and for
a champion to be crowned.
In theory, this should be good news of media companies and
cable providers looking to cash in on the tournament. Investors
looking to profit from the NCAA Tournament have two obvious ETF
as is the case with the Super Bowl
, homework is required before jumping in.
Start with the Market Vectors Gaming ETF (NYSE:
). Home to stocks such as Las Vegas Sands (NYSE:
), Wynn (NASDAQ:
) and MGM International (NYSE:
), BJK should be a beneficiary of legal gambling on the NCAA
Tournament. Emphasis on "legal" because there are two cold
realities regarding March Madness that pertain directly to
$100 million is wagered every year in Las Vegas on
. That is nothing for a company like Wynn with a market cap north
of $12 billion. Second, while it is estimated that Americans
wager several billion dollars every year on NCAA Tournament
pools, like it or not, that is considered illegal gambling. Since
it is illegal, BJK and its constituents do not benefit from the
With all that in mind, this will be the sixth March Madness
BJK has been around for. For the purposes of this article, 2008
and 2009 were excluded. The reason being is that the ETF's March
2008 plunge was induced by the financial crisis while the fund's
March 2009 was brought on by the market bottoming after the
So starting with 2010, BJK gained an impressive 9.5 percent
over the duration of the NCAA Tournament that year. However, less
than 60 days after the tournament started, all of the gains had
BJK did even better in 2011, surging about 12 percent while
the tournament was being played. Sixty days later, the gains had
held up well. Last year, BJK was trading within pennies of where
it was at the start of the tournament when Kentucky was crowned
champion. Sixty days after the start of the tournament, BJK was
flirting with prices it had not seen since January.
The other obvious March Madness ETF play is the $124.5 million
PowerShares Dynamic Media Portfolio (NYSE:
). Time Warner Cable (NYSE:
), CBS (NYSE:
) and Comcast (NASDAQ:
) combining for roughly 15 percent of this ETF's bolster the
fund's case a valid NCAA Tournament play.
Additionally, PBS and some of its constituents have a history
of moving on one-off events. For example, PBS
got a lift last year when the Hunger Games movie
. Not to mention, the ETF was solid performer for nearly all of
2012 on the thesis that media stocks would benefit from increased
advertising spending in an election year.
Bottom line: PBS has history on its side, so here is a look at
the ETF's past three March Madness performances. In 2010, PBS
climbed steadily higher during the tournament. A month after play
started, the ETF had gained about 10 percent. A month after that,
all of those gains were gone.
In 2011, PBS gained 50 cents while the tournament was played,
but the ETF did hold up well for the rest of April and into May
of that year. Last year was a rough one for PBS as a March
Madness play. The ETF
was climbing higher into the start of the
only to be taken to the woodshed over the 90 days following the
event's conclusion. That said, investors that bought PBS just
over $13 in June 2012 are no doubt happy today with an ETF
residing above 19.
For more on
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