The Biggest Winner in This Year's Super Bowl
The biggest winner in this year's Super Bowl... The sports-betting industry continues to boom... Las Vegas sportsbooks make 'multimillions'... Our gambling play is still going strong... Who wins in Iowa tonight?... Two health care stocks that will be 'on sale' if Bernie wins...
'The house always wins'...
It's a tried-and-true saying for good reason.
Last night, 102 million people tuned in as the NFL's Kansas City Chiefs came back to beat the San Francisco 49ers in Super Bowl LIV in Miami.
The game was entertaining – at least in the fourth quarter. So the fans were winners...
We watched Patrick Mahomes, the Chiefs' 24-year-old quarterback, become the youngest player to be named Super Bowl Most Valuable Player... while Kansas City's 61-year-old head coach, Andy Reid, held up the first Lombardi Trophy of his 20-year NFL coaching career.
Mahomes will likely cash in with a life-changing monster contract extension this offseason... And Reid can now sleep easier at night after previously making several deep postseason runs without winning a championship.
A 30-second commercial during last night's Super Bowl cost about $5.6 million. So Fox, which broadcast the game, was a winner, too... The TV network likely made more than $400 million from ads, which would be a new record.
But if we're talking strictly business, the biggest winner was once again... the "house." In other words, it was the casinos that raked in boatloads of money yet again on this year's event.
We could have told you that beforehand, of course... The house always wins.
You're likely aware the legal sports-betting industry has exploded in recent years...
Not long ago, you had to go to Las Vegas to place a legal – the key word being "legal" – sports bet.
But nowadays, at least in the Mid-Atlantic region, billboards on every interstate try to coerce you into making a legal bet at a nearby sportsbook. (Not here in Maryland, though, where it's still illegal... at least for now.)
Today, 13 states offer legal sports betting. The change has happened in a short time period... since the U.S. Supreme Court just opened the door for these offerings in 2018. Taking sports bets has proven to be a rare moneymaker for state governments...
Last year, for instance, in its first year offering wagering, New Jersey casinos attracted nearly $34.9 million in bets on the Super Bowl and lost only $4.6 million. This year, the American Gaming Association, a lobbyist group that represents the casino industry, estimated the total amount bet on the Super Bowl would reach nearly $7 billion... both legally and illegally.
This includes more traditional bets "against the spread," which this year favored Kansas City by 1.5 points... over/under bets (on the total points scored by both teams)... and a variety of fun and interesting "prop" bets. This year's prop bets ranged from which player would score the first touchdown... to how long it would take Demi Lovato to sing the national anthem... to the color of the Gatorade dumped on the winning coach (it was orange).
In the August issue of our flagship newsletter, Stansberry's Investment Advisory, analyst Alan Gula detailed why the house always wins. He explained how a typical football game betting line works and why sportsbooks usually make money. As Alan wrote...
There's no risk to the house as long as the wagers on both sides of the bet are balanced.
If a lot of people are betting on one team, the sportsbook will alter the point spread to entice more people to bet on the other team.
It isn't always able to balance the book, (nor is a balanced book always ideal), but even so, the sportsbook usually makes a profit.
In an example of how this played out in last night's Super Bowl, the over/under for Mahomes' rushing yards was bet up to as high as 36.5 yards.
Entering Kansas City's final possession of the game, Mahomes had 44 rushing yards. But with the outcome of the game decided and the Chiefs only needing to run out the clock to win, Mahomes kneeled on three straight plays... losing 15 yards in the process and finishing with 29 yards rushing.
"That was close to a six-figure swing" in favor of the house, Jeff Davis, director of trading for Caesars Sportsbook, told sports network ESPN after the game.
Already, we know the biggest Las Vegas sportsbooks made 'multimillions' on this year's Super Bowl...
MGM Resorts (MGM) and Caesars Entertainment (CZR) each reported multimillion-dollar wins on the game, the Las Vegas Review-Journal reported earlier today.
A number of other Vegas casinos also reportedly made in the high six-figures. At the same time, a few big-money bettors lost millions of dollars each.
Moreover, the number of states offering legal bets nearly doubled since the New England Patriots beat the Los Angeles Rams in Super Bowl LIII a year ago... from seven to 13.
Once all the numbers come out this week, we expect the total amount of legal money bet on the game – and won by sportsbooks – to be impressive... And it'll certainly be the highest ever.
Before we go further, let's note we're not here to talk about the morality of sports betting...
It can and has been addictive to many people. And as someone who started my writing career in sports, I (Corey McLaughlin) can tell you I've seen enough professional and college games – and talked to enough players and coaches – to know that winning or losing a bet on a game often involves pure luck... and not the skill of the bettor.
But sports gaming is no doubt a growing industry worthy of investment dollars...
We shared all the details of the growing sports-gaming trend in mid-December in our Stock of the Week feature. Back then, we discussed the sports-gaming scene in general and explained all the tailwinds one company in particular had going for it... betting and gambling giant Flutter Entertainment (PDYPY).
Flutter is the world's largest online betting and gaming company by revenue. It's a holding company for several businesses, including the popular and recognizable U.S.-based FanDuel sports-betting company, which it acquired in 2018.
With acquisitions like FanDuel and an already extensive market share in U.K. sports betting, Flutter is well-positioned to keep making gobs of money in a market that hasn't been fully tapped yet.
In an indication of this, just last week, shares of Penn National Gaming (PENN) jumped 12% when the company announced it's taking a 36% stake in digital sports-media company Barstool Sports. With the move, Penn National hopes to attract more folks to its gaming offerings.
It's almost certain that more states are likely to legalize sports betting in the coming years. Bank of America recently said that more than 50% of Americans will soon have sports-gambling options in their home state by 2022.
And as we wrote in the Stock of the Week feature in December, it's one of the few new ways states can bring in cash. Sportsbooks have made $1.2 billion in revenue since the Supreme Court's 2018 ruling. From the December write-up...
The tax revenue is too tempting for lawmakers to not consider it. New Jersey is taxing land-based sports-betting revenue at 8.5% and online betting at 13%.
As more states have legalized online sports betting, Flutter's shares have soared. The stock is up 48% so far this year, and recently hit an 18-month high.
In Stansberry's Investment Advisory, Alan first recommended buying shares of Flutter to subscribers back in August. Folks who took his advice were sitting on a 49% gain through Friday's close.
But don't worry if you missed out on this trade... The trend in sports betting isn't going away, and there are still plenty of additional opportunities to take advantage of it right now.
In fact, Alan and the Investment Advisory team are getting ready to tee up another recommendation this week on a company that's making a big push into sports gambling. In fairness to their subscribers, we can't share anything else today.
But if you want to access all of their analysis as soon as it comes out, we encourage you to sign up for Stansberry's Investment Advisory. Click here to get started.
Switching gears to another 'game' that's happening this week – the Iowa caucuses...
The first voting contest of the 2020 Democratic primary campaign kicked off in Iowa today. As we go to press, we don't have a good idea yet of which candidate will win. But we do know which part of the U.S. stock market to watch closely no matter what...
Health care.
It's one of the leading topics of debate among the Democratic presidential candidates. And it's a subject we've covered in the Digest a few times in recent months (here and here).
In short, each of the Democratic candidates has clear stances on health care reform. And as we've mentioned before, any news in this arena during the primaries – and perhaps the general election as well – is likely to move the share prices of certain health care stocks.
We're about to enter a news cycle dominated by health care headlines... with Democratic primary races in Iowa, New Hampshire, Nevada, and South Carolina to be decided, as well as three more debates scheduled to take place this month.
Tonight marks the start of these 'big' health care news days and nights...
If you believe the polls, "Medicare for All" fan club president Bernie Sanders and former Vice President Joe Biden are considered the frontrunners in Iowa...
Regardless, we're not here to project who will win the Iowa primary. We only care about the impact on stocks – and the trading opportunities that will present themselves – depending on who wins. These are two different things...
Sanders (and Elizabeth Warren) are on the extreme end of the "reform" spectrum, while Biden (and Pete Buttigieg and Amy Klobuchar) are more moderate. Biden favors a return to the days of the Affordable Care Act ("ACA") that he was part of pushing a decade ago...
For expert opinion, we turn to Stansberry Research editor Thomas Carroll...
As regular Digest readers know, Thomas has 18 years of experience analyzing the health care industry.
In a must-read November 21 Digest on this topic, Thomas explained how he saw this dynamic at play during his days on Wall Street... most recently during the 2008 presidential campaign.
Back then, health care reform was again a big talking point in the form of the proposed ACA. As Thomas wrote in November...
The constant scrutiny and debate surrounding the sector has made health care stocks very sensitive to proposed government changes. So many institutional investors totally steer clear of them.
And that makes health care great for investing... It's complicated, but if you understand health care, it gives you an edge.
Over the weekend, Thomas checked in with us on what to expect in Iowa today. In a private e-mail, he told us to track two main themes...
Generally speaking, it's all about the "Bs": Bernie and Biden. If Bernie Sanders gains traction – regardless of whether he can win the election or not – health care stocks will come under pressure. He literally wants the existing health insurance industry to vaporize.
Biden, on the other hand, will cause the market to come back to these stocks. In my view, health care is not Biden's primary charge in winning the White House. And he was in office when the current law of the land was put in place – the Affordable Care Act (aka "ObamaCare"). He will support it. And it currently utilizes the system as it is today.
Revamping the ACA is the most likely near-term health care reform.
As we know, markets hate uncertainty...
And there's a lot more we don't know about Sanders' proposals than about a law that, though it has flaws, is already on the books.
Specifically, Sanders hasn't convinced anyone other than maybe his supporters how the government would pay for his Medicare for All plans should he win the White House.
For that reason, Thomas says to pay particular attention to a pair of major health insurance stocks – or managed care organizations ("MCOs") – that already do a lot of business in the incumbent system. These MCOs would probably like Biden or another more "moderate" candidate to emerge in the Democratic race...
Anthem (ANTM) and Centene (CNC) will 'be on sale should Bernie win the week of headlines,' Thomas says...
Anthem is well-positioned to offer Obamacare-like health insurance products. It owns Amerigroup – one of the best Medicaid and government-focused MCOs of the last 20 years – so you can see why any positive "Bernie news" would worry investors about the company.
The company is down 12% year to date. But after reading Anthem's recent financial statements, Thomas said that he believes the company recently added to its cash reserves.
That made Anthem's 2019 fourth-quarter numbers look weaker than they could have been. But according to Thomas, the move sets the company up for more stability in the next few quarters.
Meanwhile, Centene is a government-focused health care company that Thomas says will be a great long-term play. It's also well-positioned for a Biden presidency because it's tied to Obamacare, Medicaid, Medicare, and prison and mental health programs. In particular, Thomas says of Centene...
The company has invested heavily in technology. It measures everything and often sees trends before others do.
And it recently finalized the acquisition of WellCare. WellCare was [a] competitor with Centene in a number of areas.
In the last five years, WellCare's board installed two of the most liked senior executives. They expanded revenues and margins. Institutional investors really like these guys.
Centene's current CEO is approaching the end of his career.
Should the WellCare guys take over, it could be a multiple-expanding event.
Longer term, we haven't heard many people talking about another trend yet...
If the U.S. wants to get serious about health care costs, hospitals will be squarely in the crosshairs. As Thomas detailed in November, 50% of all health care costs are connected to hospitals.
Along these lines, Thomas and the Investment Advisory team recommended a short play several months ago that can also essentially act as a hedge should a more "reform" candidate emerge victorious from the pack of Democratic presidential hopefuls.
In any event, no matter who wins or loses in Iowa tonight – or the three other primaries and the set of debates this month – you can bet on one thing...
The real winner in 2020 will be health care volatility.
New 52-week highs (as of 1/31/20): DB Gold Double Long ETN (DGP), Franco-Nevada (FNV), SPDR Gold Shares (GLD), Invesco Value Municipal Income Trust (IIM), Lundin Gold (LUG.TO), Polymetal International (POLY.L), and the iShares 1-3 Year Treasury Bond Fund (SHY).
In today's mailbag, on the heels of our annual Report Card grades (here and here), a few subscribers share feedback on Dr. David "Doc" Eifrig's trading services. Do you have a comment or question? As always, send us an e-mail at feedback@stansberryresearch.com.
"Doc's Retirement Trader is such a safe, reliable, consistent, slow-burn success, but some new subscribers may be turned off by the average returns compared to the S&P 500.
"I would think you'd use the [Invesco S&P 500 BuyWrite Fund] (PBP) as a benchmark. My quick calcs show a 5.6% annualized return for PBP from 2017-2019, which is handily beaten by Retirement Trader.
"Also, returns about 4-5X higher are available for those who have the experience to manage risk properly while selling naked puts using a margin account. A well-deserved 'A' for the service, and an A+++ for Advanced Options!" – Paid-up subscriber Bill H.
"I don't typically send feedback and this may be the first time to your company but using the strategies and methods that Stansberry Research has provided in their subscriptions (mostly Doc's options method), I obtained a return of 52.8% for 2019.
"Tremendous! I can't thank you enough for the knowledge gained through your publications. Well done!!" – Paid-up subscriber Keith F.
All the best,