The Roundhill Sports Betting & iGaming ETF (BETZ) has proven to be one of the surprise hits of 2020, not least because it's delivering a pretty solid bang for the buck.
Over the past month, BETZ has risen 15%, making it the best-performing nonleveraged/noninverse ETF on the market. (Two ETNs have posted slightly higher gains, however: the OTC-traded Claymore CEF Index-Linked GS Connect ETN (GCEC) and the iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO).)
There's no great mystery as to why BETZ has taken off, not with more states legalizing sports betting, major media conglomerates expanding their coverage of sports betting and a lockdown-weary investor base hungry for some way to fill the time. The question is, can the growth continue?
BETZ Blasts Out Of The Gate
When it launched back in June, BETZ blasted out of the gate with huge volume and a significant influx of cash: By the end of its first month on the market, the fund had seen $94 million in new net creations, making it one of the most successful thematic ETF launches of the year. (Read: "New Sports Betting ETF Sees Huge Volume")
Though BETZ has since seen much more modest creations, the fund still passed the $100 million assets under management mark at the end of August, and now sits at roughly $117 million, according to Bloomberg.
What made BETZ such a quick success was the fact that it had a clear story to tell. A 2018 Supreme Court ruling lifted the federal ban on sports betting, paving the way for states to legalize it as they saw fit.
Legalization happened just in time, too, as the COVID-19 pandemic forced many sports leagues to put games, tournaments and even entire seasons on hold. Those that have reopened have often done so for fan-less stands and arenas.
Until they're allowed to watch their favorite teams in person, many sports junkies have instead turned to online sources to scratch their fandom itch. Fans may not be able to attend the games they love, but they can still use online gaming outlets to bet on them from the comfort of their own home.
They've also taken to betting on games and tournaments of sports operating in countries that have managed to better control the coronavirus spread—a trend upon which BETZ can easily capitalize, given its global reach.
Portfolio Dominated By Sportsbooks, Tech
BETZ's portfolio is dominated by global sportsbook companies (35%), where gamblers can place bets online, as well as related tech stocks providing the infrastructure to make these bets happen (27%).
These stocks are complemented with a hefty dose of iGaming stocks (iGaming is a catch-all term for online gambling) and traditional casino companies, at 18% each.
The fund's largest holding is Australian sportsbook PointsBet Holdings (10%), followed by William Hill Ltd (7%) and DraftKings (DKNG) (6%).
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
The future looks bright for BETZ, as several of its largest constituents are actively seeking out and engaging in growth opportunities.
For example, two weeks ago, PointsBet inked a five-year media partnership deal with NBC Universal, with the former agreeing to become the media company's official sports betting partner in the U.S. That gives PointsBet national and regional access to the largest sports audience in the U.S., totaling some 184 million viewers.
Meanwhile, Disney, owner of the ESPN networks, has signed a similar multiyear agreement to partner with DraftKings for sports betting content. Disney signed a similar deal with Caesars Entertainment (CZR), a U.S. casino group that is also in BETZ, with a 3% weight.
BETZ has one competitor, the $50 million VanEck Vectors Gaming ETF (BJK). But as BJK is much more focused on traditional casinos and entertainment venues (i.e., physical locations impacted by coronavirus shutdowns), that ETF is only up 3% over the past month.
Source: StockCharts.com; data as of Sept. 15, 2020
Contact Lara Crigger at [email protected]