A sector I would love to invest in…online gambling

By: ispeculatornew
Date posted: 12.16.2009 (5:00 am) | Write a Comment  (6 Comments)

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partypokerToday, I received interesting research from Morgan Stanley about various 2010 predictions or possibilities and their impact on the stock markets. One of the industries that was discussed was online gambling. As you know, I have a tendency to get involved with technology stocks, especially in the internet subsector. It is very unfortunate that I cannot invest in one of the most important online industries.

Why? Quite simple. Because in the US, internet gambling is basically outlawed. There are many rules that describe what is and isn’t possible but the basic conclusion is that private companies are generally unable to offer online wagering.

This is fairly unique as Europe for example not only allows it but makes important revenues out of the taxes imposed, especially in Britain but also now in Italy. It is Betfair-10unclear how things will evolved as the US rulings and laws have been ruled as “illegal” by the World Trade Organisation. Of course, such rulings have been appealed and are likely to stall for a very long time.

I’m not going to argue the benefits of making this legal, simply state how nice it would be to able to invest in this industry. Companies such as Betfair, PartyGaming and Bet365 are some of the most innovative companies on the web and would offer many other possible trades. Some of my favourite trades are the pure search trades such as Google vs Yahoo. As competitors in the search field have lost market share, those trades have became more difficult. Google’s #1 competition comes from Microsoft’s Bing and we can all agree that Microsoft is far from a search play.

Alternatives?

Of course, one possibility would be to trade on UK markets, where many such companies are listed and traded. But that involves a bit more complexity than what I am looking for.

Are any of you trading these securities? Any luck doing so???

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6 Comments

  1. Comment by John — December 16, 2009 @ 8:01 am

    Nahhhh I think it’s a risky investment…Int’l regulations is preventing further growth of online gambling, especially with the emergence of the internet and the broadcast of poker tournaments (easy addition and problem gambling) ! The problem with all of this is why government would want to substitute existing taxable gambling to untaxable Internet gambling…

  2. Comment by Catarina — December 16, 2009 @ 8:13 am

    Good post. However, I don’t want to invest in online gambling stocks for moral reasons…

  3. Comment by IS — December 16, 2009 @ 8:17 am

    @John – Yes I see your point, these are important considerations but they would be priced in the stock.

    As well, since I would be long and short gambling stocks, such regulation changes would not impact me as much.

    As for the government, actually in these European countries, the websites do pay taxes and it does amount to big revenues for the governments involved:)

    @Catarina – Can’t argue with that, I understand your point:)

  4. Comment by OneDay — December 16, 2009 @ 8:26 am

    Great idea! There’s the MECN Gambling Industry Index, which tracks a representative group of 47 gambling companies. I don’t know the current performance, but I think this is a growing industry. Online gambling stocks might offer a wealth of opportunities! Being in UK, I would invest in PartyGaming (PRTY).

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