Gaming ETF (BJK) On A Hot Streak

by on March 10, 2010 | ETFs Mentioned:

Despite a sluggish economy, the Market Vectors Gaming ETF (BJK) has been on winning streak since the start of February, posting a gain of nearly 6% over the last week and a half. While some of the rebound is likely due to a slight increase in the confidence of an economic recovery, many gaming investors are betting on emerging Asian consumers to help lift up the profits for many of the stocks included in this fund. Furthermore, as states find themselves in increasingly difficult budget situations, they are turning to expanded gambling operations as a way to dig themselves out of massive budget holes. Over the past year, Delaware and West Virginia have legalized table games in casinos, while Maryland and Ohio have similar bills pending, suggesting that the future could be bright for the gaming industry.

Lately, two of the fund’s largest components have received a boost from some positive developments and expansion and development plans. Wynn and Las Vegas Sands, which combine to make up more than 12% of the total assets of BJK, both recently announced positive news regarding some of their newest projects and saw shares surge late last week. Wynn announced that it is planning to acquire and develop a Foxwoods-branded waterfront casino in downtown Philadelphia. Although a Pennsylvania Gaming Board Commission rejected Wynn’s initial proposal, the company appears to be one of the few people able to finance and develop the project. “We believe the Wynn transaction is the solution,” said Fred Jacoby, an attorney for Foxwoods, suggesting that eventually Wynn will be able to get his hands on the project.

BlackJackLas Vegas Sands also made a major announcement regarding a casino project in Singapore. While the island nation has long opposed casinos, it has reversed its stance in recent years in an effort to boost tourism and further diversify its economy. As someone who has spent a fair amount of time in Singapore, I believe that this project, along with the development of a Universal Studios theme park on the island, will go a long way in terms of making the country a  tourist destination that can compete with nearby hot-spots such as Bangkok and Bali. The project also looks to be good news for Las Vegas Sands, whose downtown Singapore casino will be opening ahead of schedule in April and is projected to bring in over $1 billion per year in revenues.

In addition to Wynn and Las Vegas Sands, BJK has allocations to about 50 other companies, including over 6% to International Gaming Technology, the second largest component of the fund. Geographically, BJK’s holdings are well diversified; only about 32% of holdings are U.S.-listed . Other countries with large allocations include Australia (14%), United Kingdom (12%), and Malaysia (12%).

While BJK focuses exclusively on companies operating in the gaming industry, it is well diversified across various sub-sectors. About 45% of holdings are in resorts and casinos, with another 33% going toward technology firms that assist gaming companies in improving or expanding their operations. Sports and race books come in third, making up just over 15% of the fund’s assets.


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Disclosure: No positions at time of writing