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Time to Best on the Casino ETF?

Things are looking up for Casino stocks and ETFs. A Nomura report indicated "a noticeable pickup in demand" in Macau's VIP and mass-market gaming revenues in the last 10 days of October, as quoted on CNBC.com. Notably, Macau registered 16.1% year-over-year growth in casino gross gaming revenues in September.

Based on the latest upbeat trend, Nomura upped its Macau gross gaming revenue estimate to reflect a year-over-year rise of 19-21% for October. This is way higher than the consensus forecast of 15.9% as well as the historical October trend (as followed by Nomura) of 13-14% year-over-year growth.  

The time is so important because, the start of October marks the "Golden Week" with China’s National Day falling on Oct 1. People go for vacations to Macau and other destinations during this time, as per the CNBC article (read: Follow These ETFs as China's 19th National Congress Begins).

If this isn’t enough, latest earnings from two industry bellwethers came in favorable. 

Inside Earnings

Wynn Resorts Ltd. WYNN posted solid results for third-quarter 2017, with earnings and revenues beating the Zacks Consensus Estimate. Wynn Macau revenues increased 15.3% year over year owing to higher casino revenues while casino revenues from Macau operations jumped 16.2%.

Las Vegas Sands Corp. LVS reported better-than-expected third-quarter 2017 results with both earnings and revenues beating the Zacks Consensus Estimate. Per management, this solid performance was primarily owing to a full quarter of operations for The Parisian Macao and stronger results at Marina Bay Sands in Singapore. However, net revenues from Las Vegas operations were down 1.6% year over year, owing to a 9% decline in casino revenues.

This means that despite all worries about the crackdown on illegal money transfer and economic slowdown, the mecca of casino gaming is returning to life.

Market Impact

Thanks to Nomura’s upbeat report, casino stocks moved northward. Las Vegas Sands gained 3.1%, Wynn Resorts added 4.5% and MGM Resorts International(MGM) ticked up 2.6% on Oct 31. Overall positive sentiment can surely be felt for the pure-play ETF VanEck Vectors Gaming ETF BJK which added 1.8% on Oct 31.

In any case, the Zacks Industry Rank is in the top 32%. The fund has a sizable exposure to the afore-mentioned stocks. While investing in a single stock is always an option, investors can take advantage of the recovery in Macau and reassuring earnings via BJK or the basket approach.

BJK in Focus

The fund looks to track the MVIS Global Gaming Index and provides investors direct exposure to the casino gaming market. The fund has so far attracted $23.4 million in assets and invested that in 40 holdings. The product is expensive as its net expense ratio is 67 bps.

All the three abovementioned companies have created places in the top 10 holdings of the fund with a considerable share. Both companies, Las Vegas Sands and Sands China, have about 15% exposure in BJK. MGM Resorts International and  MGM China Holdings call for about 8% of the fund. Wynn Resorts Ltd and Wynn Macau also account for about 8% of BJK. The fund has about 38.4% exposure to the United States followed by 14.7% in China and 14.1% in Australia (see all Consumer Discretionary ETFs here).

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Las Vegas Sands Corp. (LVS): Free Stock Analysis Report
 
Wynn Resorts, Limited (WYNN): Free Stock Analysis Report
 
VANECK-GAMING (BJK): ETF Research Reports
 
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