Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some gambling-oriented stocks to your portfolio, the Market Vectors Gaming ETF (NYSEMKT: BJK ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Market Vectors ETF's expense ratio -- its annual fee -- is a relatively low 0.65%. The fund is very small, too, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed reasonably, beating the world market over the past three and five years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
No matter whether you approve or don't, casinos and gambling seem to be here to stay, and the games they offer are designed to make gamblers lose, overall, while the house wins. Not all casino companies are the same, though, so you should choose carefully, or invest in a big bunch via a fund such as this one. Note, though, that the traditional gambling industry is being threatened by the rise of online gambling.
More than a handful of gambling-focused companies had strong performances over the past year. Melco Crown Entertainment (NASDAQ: MPEL ) surged 62%, and is near its 52-week high. Thus, with a forward P/E now above 21, it's priced for perfection. Its City of Dreams casino on Cotai has been performing well in a great location, and its projects under way include one in the Philippines.
Las Vegas Sands (NYSE: LVS ) gained 2%, and recently yielded 2.5%. It's also looking richly valued. The company seems to have violated some international corruption laws, though that might not be that big a problem. It's profitable, and its free cash flow has been growing in recent years. With properties in Las Vegas not performing as well as in the past, this company and many of its peers are looking to Asia for their future growth.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. MGM Resorts (NYSE: MGM ) shed 10%, facing some tough headwinds that include a massive and growing debt burden. It's pinning a lot of hope on a Cotai casino under construction, but that isn't scheduled to open until 2016.
Another good way to profit off of gambling's growth is to invest in the companies that equip the casinos, such as International Game Technology (NYSE: IGT ) . Down about 1% over the past year, it recently upped its dividend by 14%, and yields about 1.9%. Better still, its P/E ratio is below its five-year average, and its forward P/E of 11.6 is below that of the S&P 500. It's getting into the online gaming business, too, and in its recent quarter, reported revenue up 19%, North American product sales up 54%, and social gaming revenue up 15%.
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
For many companies, successfully capitalizing on a booming Chinese economy is like winning the jackpot. That's indeed the case for gaming company Las Vegas Sands, which made a big bet on Macau gaming about a decade ago that's paid off in spades. The company is now looking to spread its empire further, but will it be able to replicate its prior successes? Learn about all these opportunities, and the risks they pose, in our brand new premium report on Las Vegas Sands. Be sure to claim your copy today by clicking here.