Gambling Stocks Get Punched in the Mouth

Written by Jimmy Mengel
Posted February 18, 2021

Much like his presidency, Donald Trump’s famed casino empire went out with a bang…

One created by 3,000 pounds worth' of dynamite.

Yesterday, Trump Plaza Casino was blown to smithereens in a controlled demolition. The local government even offered up a raffle to be the one to push the button. But while it took only a few seconds to destroy the building, the writing had been on the walls for years.

At one point, it was the single biggest casino in Atlantic City and arguably put the city on the map as a worldwide tourist destination for those of us that like to sling cards, toss dice, and yank slots. And there were many, many people doing so.

Trump Plaza was the single most profitable casino in Atlantic City for a time. Celebrities from all over the world would travel there to eat, drink and gamble. It wasn’t a surprise to see Madonna, Mick Jagger or Jack Nicholson sitting ringside for one of the famous Mike Tyson fights that took place on the property.

You could say that Trump made gambling and boxing — and gambling on boxing — great again!

Fast-forward to today, however, and that luxurious palace had fallen into complete disrepair, along with the entire casino industry in the place that spawned Monopoly. Suffice it to say, there were no monopolies in the casino business at the time, and Trump Plaza was hemorrhaging money for many years before declaring bankruptcy and finally falling to its knees.

But while Trump and his casino have been immolated in recent weeks, gambling itself is having a resurgence…

In 1976, the resort city was crime-plagued and had serious trouble attracting tourists. Hotels were closing left and right. That’s when New Jersey legalized gambling. This all reminds me a heck of a lot of the cannabis industry, which I’ve detailed many, many, many times before.

The very real need for tax revenue to cover budget shortfalls will force the hands of many states that are currently on the fence about legalizing gambling.

We've already seen states like Virginia and Tennessee legalize gambling this year. 

Sports betting is legal in 21 U.S. states right now, including New Jersey, obviously, and Pennsylvania. People go to other states to gamble, which led my own state of Maryland to legalize gambling to avoid people going to other states to spend their money.

I personally have been to the Horseshoe Casino in downtown Baltimore — for a Norm Macdonald comedy show, I should add — but witnessed a lot of money being parted from the customers that would have gone to Delaware otherwise.

But there are four pillars that have not legalized it: California, New York, Texas, and Florida.

My bet is that at least two of those will fall, opening up billions in additional revenue and jobs.

To go back to the Trump Plaza, my favorite Mike Tyson quote is, "Everybody has a plan until they get punched in the mouth."

And casinos have indeed been punched in the mouth. The coronavirus lockdown has cost casinos countless millions of dollars. Vegas turned into a ghost town. Casinos have been losing money on bets, rooms, and food and beverages. 

But that should change this year, and here are two ways to play it...

The first one is an ETF with the perfect ticker: BETZ, Roundhill Sports Betting & iGaming.

It tackles the online stuff pretty well, as its major holdings are Penn National Gaming Inc. (NASDAQ: PENN), Flutter Entertainment PLC (LSE: FLTR), and the big one this year, DraftKings Inc. (NASDAQ: DKNG).

It even focuses on SPACs betting on sports betting technology and data providers. It has an expense ratio of 0.75% and 40 holdings.

Since one year ago, near when it launched, here's how it's done...

 

betz ytd

Online gaming is the future, but there is plenty of cash made from the past...

Enter VanEck Vectors Gaming ETF (NASDAQ: BJK).

If you've been to Vegas — which I've done too many times for my own good — you've likely seen people dumping money into all kinds of casinos and hotels. While the travel restrictions have curbed visits to "Sin City," that will pass and these casinos will go back to making money hand over fist. 

BJK has holdings in the real world, like Wynn Resorts (NASDAQ: WYNN) and Las Vegas Sands (NYSE: LVS) — which are beaten down for obvious reasons. People will start flooding these casinos as soon as they can. It should do quite well this year and beyond. Blood in the streets, as they say.

Though I have my issues with Vegas — and gambling — I like money where I can get it. Considering that Wall Street is the house and you are the mark, I would suggest betting on the house.

Despite the casinos imploding, there is a phoenix rising from the ashes.

Vice stocks are going to do well, that's all I'm saying...

Godspeed,
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Jimmy Mengel

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Jimmy is a managing editor for Outsider Club and the investment director of several personal finance advisories, The Crow's Nest, and The Adventure Capitalist For more on Jimmy, check out his editor's page.

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