Basket These 5 ETFs to Tap March Madness

The start of the 2019 National Collegiate Athletic Association (NCAA) Division I Men's Basketball Tournament has spread “March Madness” and millions of Americans are seeking to capitalize on this opportunity by enthusiastically filling in the brackets.

Though the championship will divert a large number of Americans from the stock market and dried up trading volumes, it usually leads to a buying frenzy and strong stock gains. The current year seems no different as the U.S. bull market turned a decade old on Mar 9 and is extending its rally, driven by record stock buybacks, all-time high dividends, greater confidence and a buoyant economy (read: Top-Performing ETFs Of The 10-Year Bull-Run).

Being the biggest modern sporting event in the United States, the championship is a money-spinner for media networks (TV, digital and social media) and advertisers, attracting billions of revenues in just three weeks.

What’s on a Roll?

The TV media conglomerates — CBS Corporation (CBS) and Turner Sports — continued to score maximum revenues from the event by broadcasting through four networks, CBS, TNT, TBS and truTV. Per Kantar Media, the NCAA tournament generated about $1.32 billion in national TV advertising revenues, a number that has been steadily increasing 3-5% each year.

All the football matches will also stream on the NCAA’s March Madness site and via “The NCAA March Madness Live App,” which is available on many devices including iOS, Apple AAPL TV, Apple Watch, Android, Amazon AMZN Fire tablets and TVs, Chromecast, Roku players and TVs plus Xbox One. March Madness Live can also be accessed with Amazon's Alexa-powered speakers.

Apart from media, the contest is a boon to the casino industry. Per the American Gaming Association — a national trade group that represents the casino industry — 47 million Americans are expected to gamble $8.5 billion at this year’s NCAA men’s basketball tournament with 1-in-5 adults placing a bet. Of these, $4.6 billion will be wagered on a collective 149 million brackets by more than 40 million people. Additionally, 18 million Americans will place $3.9 billion bets at a sportsbook or online with a bookie or a friend. Notably, 4.1 million will bet at a casino sportsbook or using a legal app, 2.4 million will bet illegally with a bookie and 5.2 million more will bet online, likely on an illegal offshore site (read: Moderate Earnings Put Casino ETF in Focus).

Sponsors invest millions in advertising and marketing the March Madness phenomenon. AT&T T, Capital One COF and Coca-Cola KO are leading three sponsors for NCAA March Madness Live. These companies are also expected to gain traction from the competition.

ETFs to Bet on

As the contest is a top-seeded revenue driver for sponsors, media, networking players and casino industries, investors can easily basket some gains by jumping into the ETFs in these spaces. Any of the products mentioned below could make for an exciting March Madness game.

Invesco Dynamic Media ETF PBS

This fund tracks the Dynamic Media Intellidex Index and seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria. The approach results in a small basket of 30 media stocks with none of the firms accounting for more than 5.3% share. Media & publishing dominates the sector with 65% while software & IT services take the rest. The product has amassed $67.7 million in its asset base while trading in a light volume of about 26,000 shares a day. It charges 63 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Follow Loeb's 13-F Disclosure With ETF & Stock Strategies).

Global X Social Media ETF SOCL

This fund provides access to social media companies around the world by tracking the Solactive Social Media Total Return Index. It holds 32 securities in its basket with a double-digit exposure to the top two firms, namely Tencent and Twitter. Other firms hold less than 9.7% share. In terms of country exposure, American firms cover half the portfolio followed by China (14.5%) and Hong Kong (12.8%). The fund has $137.5 million in AUM and average daily volume of about 37,000 shares. Expense ratio comes in at 0.65%. SOCL has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

VanEck Vectors Gaming ETF BJK

This ETF provides investors with exposure to companies involved in casinos and casino hotels, sports betting, lottery services, gaming services, gaming technology and gaming equipment. It follows the MVIS Global Gaming Index, holding 43 securities in its basket. It is moderately concentrated across components with each holding less than 8.2% of the assets. In terms of country exposure, United States takes the top spot at 41.7% followed by China (15.2%) and Australia (13.7%). It has been overlooked by investors as depicted by AUM of $27.1 million and average daily volume of roughly 9,000 shares. BJK has a Zacks ETF Rank of 3 with a High risk outlook.

Invesco Dynamic Leisure and Entertainment ETF PEJ

This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 30 U.S. leisure and entertainment companies. It is pretty well spread across components with each holding less than 5.4% share. Though restaurants & bars dominate the fund’s portfolio with 31.5% share, broadcasting, entertainment production and leisure & recreation get a double-digit exposure each. The ETF has accumulated $66.1 million in its asset base and trades in a soft volume of 17,000 shares a day on average. It charges 63 bps in annual fees and is a Zacks #3 Ranked ETF with a High risk outlook (see: all the Consumer Discretionary ETFs here).

VanEck Vectors Video Gaming and eSports ETF ESPO

This fund renders exposure to global companies involved in video game development, e-sports plus related hardware and software by tracking the MVIS Global Video Gaming and eSports Index. Holding 25 stocks in its basket, it has a moderate concentration across components with each accounting for less than 8% share. American firms represent one-third of the portfolio while Japan, China and South Korea round off the next three with a double-digit allocation. The fund has gathered $13.7 million in its asset base while trading in average daily volume of 8,000 shares. It charges 55 bps in annual fees from investors (read: Video Gaming Stocks in Red, Are ETFs Relatively Safe?).

Bottom Line

These products are expected to benefit from the March Madness and the huge revenue generation scope for media, advertisers as well as casinos.

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Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
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VanEck Vectors Gaming ETF (BJK): ETF Research Reports
 
Global X Social Media ETF (SOCL): ETF Research Reports
 
Invesco Dynamic Leisure and Entertainment ETF (PEJ): ETF Research Reports
 
Invesco Dynamic Media ETF (PBS): ETF Research Reports
 
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