Profit Pregame

Why You Should Put Your Money on Gambling Stocks in 2021

A major catalyst is coming for the gaming industry, and a recent dip in price makes one stock a great bet.

What’s happening?

Despite lengthy lockdowns and being forced to operate at limited capacity, leisure stocks have done incredibly well during the pandemic.

Since the March 2020 lows, the VanEck Vectors Gaming ETF (BJK) has gained as much as 120%. The U.S. Global Jets ETF (JETS) gained as much as 95% at its height in early April.

That’s just a couple examples of the unexpected success these industries have had over the last year.

But as more and more casinos re-open, flights become available, and leisure businesses everywhere are able to relax Covid-19 restrictions, this may be just the beginning for the run up.

And there is one gaming stock I really like right now.

But first, let’s take a look at what’s happening in the industry…

Where’s the money?

During a pandemic, one might expect casino stocks to plummet.

After all, most casinos around the world were forced to shut down for months on end in 2020 – many of which didn’t open, even at limited capacity, until the second half of the year.

But as the market took off from the march lows, so too did gaming stocks.

So what has been behind the success casinos experienced, even while their doors were closed?

The answer is online gambling -particularly on sports.

Since the Supreme Court struck down a ban in 2018, 25 states have since voted to legalize sports gambling. And with more and more casinos now offering online betting platforms, they are able to attract new customers that otherwise would have never gone to a casino to place a bet.

Already, we’ve seen a record $4.3 billion in bets placed on the last Super Bowl. And this year’s NCAA Tournament attracted billions more in wagers than the prior tournament.

It almost goes without saying that gaming stocks have greatly benefited from the online gambling trend.

But as vaccination efforts continue, most casinos anticipate being able to open their doors to a greater number of guests later this year, further increasing revenue.

And there’s one name I like best to play such a lucrative catalyst…

How do I get some?

While online gambling may have saved many casinos during the darkest months of the pandemic, make no mistake – casinos still rely heavily on foot traffic for success.

Gambling stocks have pulled back from recent highs, but I still think they have more upside as the world inches closer to having a safe percentage of the population vaccinated.

As soon as casinos can begin attracting customers back through their doors in larger numbers, I believe we’re going to see some big revenue spikes from pent-up demand.

And gaming stocks are set to boom when it happens.

After all, if a company can go through a year with no revenues and make it through, then I think the stocks should have more upside.

My favorite name in the gaming world right now is Melco Resorts & Entertainment Limited (MLCO), which operates several luxury casinos throughout Asia and Europe.

The stock is currently off almost 20% from the high it achieved last month, offering a fantastic buying position.

In the Spotlight: Tax Concerns Drag the Market Down

A good deal of yesterday’s market weakness was caused by a big announcement from President Biden.

The latest proposal from the new administration aims to nearly double capital gains taxes for wealthy individuals.

The 39.6% rate would apply to those earning $1 million or more.

The news forced the market back down in afternoon trading yesterday after a brief late-morning rally.

The announcement comes at a bad time for the market, as more bearish sentiment creeps in. But is the market’s reaction to the tax change overblown. I’ll be keeping a close watch on the reactions from some of Wall Street’s biggest earners to see if the planned rate hike will alter investing strategies, and what it means for you. Stay tuned.

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