NEW YORK (TheStreet) -- Gaming stocks have been hot in 2013 thanks in large part to the boom in gambling by mainland Chinese in Macau. The Market Vectors Gaming ETF (BJK)BJK is up 39%, well ahead of the S&P 500's 27% year-to-date gain. A new catalyst for the group and BJK could be newly legalized online gambling in New Jersey.
According to a report published at Seeking Alpha, most of the larger casino companies including Boyd Gaming (BYD)BYD, MGM Resorts International (MGM)MGM and Caesars Entertainment (CZP)CZP all have online gaming divisions and stand to benefit from legalization in New Jersey and likely other states in the future. Only three states allow online gaming.
A report from Morgan Stanley (MS)MS cited in that same article estimates that revenue from online gaming in 2014 could be $670 million, growing to possibly $9.3 billion by 2020.
The Market Vectors Gaming ETF, of course, captures the space and should benefit from online growth. It is a global fund with the U.S. having the largest country weighting at 29%, followed by China at 25% and the UK at 14%.
BJK has 46 holdings, the largest of which are Sands China and Las Vegas Sands (LVS)LVS, both with slightly more than 8% weightings.Slot machine leader IGT (IGT)IGT, which has a 2.6% weighting in BJK, recently purchased Double Down Interactive so it can capitalize on online trends. Clearly the industry is optimistic for online's prospects. On the negative side of the ledger, USA Today had a lengthy editorial calling for the U.S. Congress to shut online gambling down for social and ethical reasons.
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