Friday’s ETF To Watch: Market Vectors Gaming ETF (BJK)

by on February 4, 2011 | ETFs Mentioned:

As a modest recovery has begun to take place in the United States and elsewhere around the world, investors have begun to cycle back into discretionary firms which are poised to surge should consumers continue to open up their pocketbooks and spend. Arguably, the most discretionary sector of all, the gaming industry, has seen its fortunes rise as well. This is largely due to the fact that many consumers feel comfortable enough with the economy to try their luck at casinos and take vacations again, both here and around the world. However, this notion was put to the test last night after the bell when the world’s biggest casino operator by market capitalization– Las Vegas Sands (LVS)– reported its most recent quarter of earnings.

The Nevada-based casino and hotel operator, gave its report last night and investors were undoubtedly interested to hear what the company had to say regarding its diversified lineup of hotels which stretch from Las Vegas to various Asian markets. The company also had an extremely active 2010 in which LVS opened the first casino in the nation of Singapore. This newest addition to the LVS lineup added $560 million to the top line numbers, a growth rate of 15% over the third quarter while revenues at the casino’s Macau and Las Vegas properties also increased by double digits as well. “Marina Bay Sands is really still in its infancy we are extremely pleased with the property’s results and its position in the market,” said Las Vegas Sands Chairman Sheldon Adelson. “The Singapore market is still emerging and as we near the completion of our property’s original master plan, the market is all but certain to grow.”

These quickly growing properties allowed the company to report relatively good earnings, but incredibly lofty expectations prevented LVS from crushing or even meeting some targets. LVS reported earnings of 34 cents a share versus a loss of 17 cents a share, in the same period a year ago. However, it is important to note that, on an adjusted basis, the company said it would have earned 42 cents a share. Unfortunately, for shareholders in the firm, analysts had expected the company to post earnings of 38 cents a share on revenues of $2.05 billion compared to actual revenue of $2.02 billion, meaning that the company failed to hit its marks despite robust revenue growth in-excess of 50%.  As a result, shares of LVS sold off significantly in after-hours trading yesterday, sliding by more than 6.5% at one point [read ETF Plays To Invest Like Fisher, Paulson, And Buffett].

This sell-off cast a cloud over the industry and due to this reaction to this important news release, investors should look for the Market Vectors Gaming ETF (BJK) to remain in focus throughout Friday’s trading session. The fund offers an 11.3% weighting to the in focus Las Vegas Sands while also allocating high weightings towards Malaysia’s Genting Berhad as well as Wynn Resorts and International Game Technologies. In total, the fund offers exposure to 55 companies involved in the gaming industry and with the biggest publicly traded firm in the sector reporting, the fund looks to be in for an interesting end to the week to say the least [see holdings of BJK here].

It is hard to say how BJK will react to the report from LVS; the Market Vectors fund has significant exposure to Asian markets which could see a boost from the robust business that LVS saw in Singapore but the fund could also sink thanks to the company’s revenue miss. As a result, investors should expect a volume heavy, and probably volatile, trading session out of this popular fund in Friday trading [see Gaming ETF On A Hot Streak].

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Disclosure: No positions at time of writing, photo is courtesy of William Cho.