The Capitalist Investor - Episode 41

Football is BACK! At least for now, the NFL season is kicking off, 6,000 fans are allowed in the Browns Stadium—and we couldn’t be more excited. So Derek and I thought this would be the perfect time to talk about the rise of sports betting. In this episode of The Capitalist Investor, we share some pertinent stats, talk about the expected growth of the industry, and share how YOU can take advantage of the uptick in sports betting with stocks. Do not miss this one!

Outline of This Episode

  • [0:19] It’s finally September: Football is back!
  • [1:45] The different ways to bet on sports
  • [4:31] The sports betting industry is expected to 10x
  • [7:48] Statistics by the American Gaming Association
  • [10:41] A conversation about fantasy football
  • [12:30] The first way to play: DraftKings
  • [19:02] Some numbers to leave you with

Statistics from the American Gaming Association

We’re gonna start with some interesting statistics. According to the American Gaming Association:

  • 17% of Americans will bet on the NFL this season
  • 6.6 million people will wager at a legal sportsbook
  • 34% will bet through a legal platform (apps)
  • 18% of the bets placed will wager with a bookie
  • 26% will bet casually (fantasy football, pools, etc.)
  • [14:40] The second way to play: Penn National

46% of people surveyed in 2018 who already wager on sports would bet more if it’s legalized. 27% of people who watch sports would like to bet. Sports betting in New Jersey in June 2020 was up 30%—with no major sports playing. The numbers are expected to continue rising as it becomes more widely accessible.

Legalizing sports betting (in more than just Vegas)

Dave Portnoy has really led the charge forward for legalized sports betting. There’s somewhere between $50 to $200 billion placed on sports bets in a single year. Why? A bookie doesn’t have to pay taxes. Once it’s legalized, you can bet in a casino or place a bet on an app. The cost to do so will increase because the companies have to pay taxes, employees, overhead, etc. A lot of baby boomers who already gamble will likely stick with their bookie. But the younger generations will likely join the trend legally.

The sports betting industry is expected to 10x

The sports gaming industry does just under $2 billion a year in revenue. The industry is expected to 10x over the next 10 years. It has been legalized in 20 or so states and it’s pending in 20 more. By 2021, it will be legalized in almost 40 states.

New Jersey made sports betting legal in 2019. They went from zero to $4.58 billion in handle, have earned a revenue of $300 million, and $36 million is going directly to the state for taxes. If your state hasn’t legalized sports betting, they’re losing out. Ohio is close to approving sports betting. Both the house and the senate have approved it and they’re just deciding on where the government fits in.

The two ways to play: DraftKings and Penn National

Draftkings merged with DEAC and technically came out as an IPO this year. This is your pureplay on the legalization of online sports betting in the United States. Michael Jordan invested in DraftKings and is an advisor on the board. That’s HUGE. The only downside is that it is a stock that pulls back every now and then. If the legalization is held up somewhere, it will pull back.

Penn National (stock option #2) operates around 40 regional casinos and racing facilities. They’re currently doing better than destination casinos in Vegas, where hotels are currently operating at 20% capacity. This is more of a diversified play. Penn also owns a percentage of Barstool and has access to 66 million users. The Barstool Sportsbook app is rolling out in September which could be a huge catalyst for them.

Since Penn has physical locations, it’s eligible to receive skin compensation from online operators like DraftKings. That can be 5–15% of revenue, which is a significant amount. That gives Penn National an advantage. Plus, Dave Portnoy is touting Penn stock regularly. Most of the 66 million users are millennials—62% of them gamble on sports. If they can convert even just 10% of the 66 million, the sky’s the limit. There is real long-term potential for some huge revenue.

Resources & People Mentioned

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Show Notes by

Keep Listening to The Capitalist Investor:
Episode 15:
Spending Strategies in a Bear Market, Ep #15
Episode 31:
Handicapping the 2020 Election, Ep #31
Episode 47:
11 Investments in Your Home That Pay Off, Ep #47
Episode 63:
Jeff Bezos and Amazon: Past, Present, and Future Ep #63
Episode 79:
7 Ways Biden Plans to Tax American Families (Part II), Ep #79
Episode 95:
5 Beaten Down Stocks to Buy on the Dip, Ep #95
Episode 111:
Special Episode – Talking Energy with Daniel Turner, Ep. #111
Episode 127:
Retail Earnings Tank & What The Heck is Greenflation? Ep. #127