The JohnWallStreet Sports Index posted a 7.7% gain for the month of December, handily outpacing the S&P 500’s performance in the month, as expectations for getting through the pandemic continued to hearten investors.
The Sportico index is a basket of 40 sports-related stocks, including stocks traded in the U.S. on a major exchange, such as Manchester United and DraftKings, and over-the-counter issues of organizations traded on a foreign exchange, such as Adidas and Italian soccer club Juventus.
Leading the index’s performance for the month is Penn National Gaming, a casino and sportsbook operator that has a minority interest in privately held Barstool Sports. Penn rallied almost 25% in December, driven by the continued expansion of sports betting in the U.S. The company acquired casino operations in Maryland this month to capitalize on the approval of sports betting in that state on Election Day. Penn also announced three new Barstool-branded sportsbooks last week, pending regulatory approval.
Video game makers also enjoyed a strong month, with Electronic Arts, publisher of Madden NFL as well as FIFA-, NHL- and UFC-licensed games and other sports-themed titles, gaining 12.6%. EA is outbidding competitor TakeTwo to buy the U.K.-based CodeMasters, a leading producer of auto racing games, including the F1 series. EA will pay $1.2 billion for CodeMasters. Interestingly, losing out on the bidding didn’t crimp TakeTwo’s shares, which rose similarly, up 15.1% on the month, thanks to expectations of strength in its non-sports franchises, which include Grand Theft Auto.
Among other top performers in the JohnWallStreet Sports Index are Walt Disney and Madison Square Garden Entertainment. Disney wowed Wall Street with subscriber numbers for its Disney+ service. The company, which owns ABC and ESPN, is also bundling its ESPN+ streaming service with Disney in some subscription packages, such as subscriber bonuses given by Verizon Mobile. ESPN+ has more than 11 million subscribers, Disney told investors earlier in the month. MSG Entertainment—which owns Madison Square Garden, operates venues in Boston and Chicago, and is building a new Las Vegas arena, The Sphere—appears to be benefiting from expectations that at some point in 2021, fans will be able to attend events once again.
Indeed, much of the strength of sports stocks is linked to expectations of sports returning to normal, at least in the back half of the coming year. “As long as the pandemic abates and procurement and distribution of the vaccine happens, [we should be] looking at a boom in the overall sports and entertainment industry in the second half of 2021,” Joe Brusuelas, chief economist at RSM, told JohnWallStreet.
While the Index’s performance in December represents a slowing down from November—when it surged more than 20%—only a handful of component stocks lost value in the period, and none by more than a few percentage points.
The JohnWallStreet Index was reconstituted at 1,000 points as of the start of August, so annual performance isn’t yet available. However, in the five months into the end of the year, the index gained more than 40% to close the year at 1,417.76. By comparison, the S&P 500 had almost a 15% gain over the same period after adding a 3.7% advance in December.
(This story has been updated throughout to reflect December 31 market performance.)