Although the economic outlook remains uncertain, the gambling
industry has come roaring back in months past. This is largely due
to more hope over the health of the U.S. economy and continued
growth in disposable income in many key emerging markets around the
globe. Beyond these factors, some of the key gambling cities in the
world have seen continued growth as well, suggesting that the worst
may be over for the industry.
In fact, despite the broad concerns over the health of the
Chinese market, Macao, the only city in the country where gambling
is legal, has seen gambling revenues continue to surge to end 2011.
to a record of $33.48 billion ensuring that the city continues to
be a Mecca for the global gaming industry. Additionally, the
upstart of Singapore is expected to see
double digit revenue growth
as well, further cementing its spot as the second biggest gaming
market on Earth despite only having two casinos which have been in
operation for less than two years. Yet even for those looking
closer to home, in the traditional hotspot of Nevada, news has been
pretty good as well. Gambling revenue increased by
7% in November
, suggesting that the growth isn't limited to Asia alone (read
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Even if the economy doesn't pick up, however, casinos could see
growth from the opening up of a variety of new markets which could
provide casinos with fresh consumers for their resorts. State and
national governments are becoming increasingly desperate for new
revenues to plug budget holes and allowing the construction of
casinos is a pretty easy way to boost collections. Often times,
governments don't have to spend anything they merely have to
sanction the casinos, and given the broad aversion to spending cuts
or tax increases this could be the way to go in the future (read
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Already plans are in the works for multibillion dollar casino
complexes in states such as
Florida and New York
, while smaller projects could be given the green light in states
, and a variety of others as well. The plans stretch beyond the
U.S. too, as there are reports of new casinos in a number of Asian
, and a few smaller, less developed nations as well, suggesting
that the coming years could see high rates of expansion for the
gaming industry, even if just a fraction of these proposals go
through the legislative process.
Gaming ETF In Focus
Given these trends, some investors may want to consider making a
bet on the continued resurgence of the sector in 2012 and beyond.
For these investors, there is one ETF available that is a good
proxy for the global industry; the Market Vectors Gaming ETF (
). This fund looks to track the S-Network Global Gaming Index,
which is a ruled-based, modified cap-weighted, float-adjusted
benchmark designed to give broad access to the global gambling
industry. Currently, the fund charges investors 65 basis points a
year in fees and holds 53 securities in total (read
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In terms of country exposure, American firms dominate making up
nearly 36.4% of total assets, by far the most for a single nation.
Beyond the U.S., however, two Asian markets take the next spots
with China (18.3%) and Malaysia (9.8%) rounding out the top three.
Overall the exposure is pretty well spread out among countries and
regions as Australia, the UK, Japan, and South Korea round out the
top seven destinations. For individual securities, the most assets
go towards Las Vegas Sands (
) with 15.3% of the total while Wynn Resorts (
) and Genting comprise the rest of the top three, making up 7% and
6.4% of total assets, respectively.
While the winds may be ad the industry's back, investors should
note that the sector is by no means without risks. Many casinos
continue to struggle under heavy debt loads thanks to a
pre-recession building boom and some have not yet recovered.
Additionally, BJK has a beta of 1.3 suggesting that the fund can be
far more volatile than the overall market. In fact, the fund's best
three month period saw a 50% gain while the worst three month
period experienced losses of nearly 45%, showing just how quickly
stocks in this sector can move (see
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Nevertheless, for investors who are encouraged by the plethora
of casinos that could be opening up soon as well as strong revenue
numbers from some of the top gaming destinations of the world, this
could be an intriguing time to buy. The P/E of the fund is just
12.5 while the Price to Sales is 1.8, suggesting there could be
some decent values in many of the securities in the fund. Add in a
solid yield of over 2% and some risk-tolerant investors could hit
the jackpot with this Van Eck ETF (read
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Author is long LVS.
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