The start of the 2020 NFL season two weeks ago also means numerous hours are spent on research and preparation for various Fantasy Football leagues, Survivor Pick ‘Em pools and of course, sports betting. Normally, this would be the time in which there is a big uptick in sportsbook wagers being placed up and down the Las Vegas strip. However, given COVID quarantines, gamblers are turning to more modern methods to place their bets.
The unexpected pandemic, which led to lockdowns and a delay and even some cancellations of all major sports, led many bettors to Robinhood type trading platforms instead to “gamble” on their favorite stocks. With the return of “fan-less” sports, some of those wagers have shifted back to online betting. FanDuel and DraftKings are the two most popular platforms that have expanded from DFS, or Daily Fantasy Sports, into full-fledged online casinos. For those unfamiliar, these companies offer an online sportsbook platform, along with fantasy sports, allowing users to place sports bets from the comfort of their own couch, feet up and beverage of choice in hand. We have known for a while that Vegas would be one of the hardest hit economies given the complexities of this virus, and with many Americans spending more time at home nowadays, this has certainly created an ideal environment for the online sports betting business. Like many “hot” trends, these companies will be subject to normal pressures of growth, margin control and perhaps ultimately, gravity.
A question we are now posing as the return of sports has arrived; would this money be better off spent betting on sports, or being invested in online gambling company stocks? DraftKings stock (DKGN) has returned over 200%, since going public on April 24, 2020. That means that a $1,000 investment would result in a market value over $3,000 today, a solid return, or in the gambling world, a successful +200 underdog bet.
Would $1,000 worth of sports bets during this time period result in a similar return? The answer is unclear (though perhaps doubtful). Unlike betting, stocks are not a zero-sum game, and most companies make real money, hire real people and have potential for great long-term profits.
We are neither advocating nor disparaging gambling of any kind but believe disciplined, long-term investing certainly tilts the odds towards financial success and may prove a more rewarding use of any excess disposable income.