There were two ways to make money on gaming stocks in the first half of the year:
1. Buy technology stocks related to sports betting.
2. Have the courage to buy during the Covid-19 panic of mid-March.
If you didn’t do either of those, you lost money.
Virtually every gaming company rebounded from March lows, but nearly all are well below where they began the year. Fantini’s North American Index, for example, fell 29.8 percent through June 30. Fantini’s Global Index plunged 31.8 percent. Even online stocks, so often touted as stay-at-home plays, declined. Fantini’s Interactive Index did better than its brick-and-mortar cousins but still slipped 2.4 percent.
But there were winners—big winners—if you picked the right stay-at-homes.
One place to look was Sweden. Kambi, a Stockholm-listed provider of online sports betting platforms, jumped 52 percent. Fellow Stockholm-listee Evolution Gaming, which provides live-dealer games to gambling websites, leaped 92 percent.
The U.S. had two even bigger winners. GAN, another platform provider, jumped 90 percent after its May 5 IPO. If you were fortunate enough to get in on the IPO at $8.50, you’ve more than tripled your money. DraftKings, the daily fantasy sports operator now in the all-out gambling world, also began trading this spring. It’s up over 90 percent since its April 23 debut.
Investor infatuation with sports betting helped a couple of conventional companies beat the virus, as it were. London-listed Flutter rose 12 percent in the first half. Penn National, which excited investors by purchasing a big chunk of sports media company BarStool Sports, jumped 17 percent.
Otherwise, it’s been red everywhere. But not since mid-March.
For example, if you bought Wynn on January 2, you’ve lost 48 percent. But If you bought Wynn at its March low, you gained 73 percent by mid-year. The story is the same throughout gaming. MGM Resorts is down 50 percent for the year, but up 285 percent since mid-March.
Some examples are even more extreme. Take Penn National again. The stock was $3.75 at its March low, and $30.54 on June 30. That’s an eight-bagger in just over three months.
Ditto suppliers. IGT is down 41 percent for the year, but up 250 percent from mid-March. Little AGS was down 72 percent through June, and up nearly 400 percent since its low.
And those are fairly typical examples. Again, the North American Index fell 29.8 percent through June, but that’s a big comeback from mid-March, when it was down 62 percent.
The rollercoaster was even steeper if you bought gaming stocks in early to mid-February, when many of them hit all-time and 52-week highs.
So, what does the second half of the year hold?
As Dr. Fauci might say, the virus will tell us.
If the recent explosion in Covid cases continues, or if we suffer a significant second wave in the fall, stocks could revisit the March debacle.
Even if we muddle through, there’s the reality of a high jobless rate and lost income that could mute consumer spending into next year. In such a scenario, gaming stocks today are mostly about where they should be, and could be range-bound into 2021.
On the other hand, consumers have been resilient, as their spending and confidence surveys show, and companies are rehiring at a faster rate than expected. Investors have shown they can respond exuberantly to such good news.
The betting here is on muddling. But don’t bet too much.
