Sports stocks notched an impressive gain in a volatile January, as investor appetite for sports betting powered the JohnWallStreet Sports Stock Index to close at 1,503, up 6% on the month. The broad market, represented by the S&P 500, skidded into a 1.1% loss, consumed by GameStop, Reddit and their ramifications on everything from the options market to the Mets. It’s the third straight month the Sportico index has beaten the benchmark S&P index, and the fifth of the past six months.
Like the rest of the stock market, however, the 40-company sports index had a volatile open to 2021, with 11 components posting double-digit gains and six posting double-digits losses in January. As states expressed openness to expanded mobile gambling, related stocks largely powered the index. Toronto-based TheScore gained 96.7% in the month as investors grew heartened by the publisher’s increasing shift to sports betting and its decision to seek a listing on a U.S. exchange. A New York Stock Exchange or Nasdaq Stock Market listing would enable the company to be purchased by a wider audience, including a number of ETFs and mutual funds that otherwise wouldn’t hold a Canada-listed stock. Other gambling-centric firms like Australia-based Pointsbet Holdings rose 26%, while Penn National Gaming, bolstered by its minority stake of Barstool Sports, rose 20.4%. DraftKings added 16.2% in the month.
Fubo TV was the second-best performer in the JohnWallStreet index in January, gaining 53.5% to finish at $42.99 a share. Sports fans still largely stuck at home supported the streaming services’ sports-first approach, but it was management’s plans to add sports betting that really excited Wall Street. Shares have surged almost 74% since a mid-month announcement that Fubo would acquire Vigtory, a sports betting and interactive gaming firm. Fubo was added to the Sportico index at the start of this month, along with another top performer, dMY Technology II. DMY is better known as the SPAC acquiring Genius Sports, the sports data service that feeds bookies and others involved in the betting and analytics ecosystem. Shares of the SPAC added 14%.
Bigger, more established names led the losers in the month. Puma fared the worst, surrendering almost 17% of its value. Fellow European shoemaker and athletic brand Adidas lost 13%. U.S. apparel makers Nike and UnderArmour shifted only a little in the month, suggesting Europe’s stricter quarantine is affecting retail sales. Businesses reliant on live events, such as Manchester United (down 13.7%), Knicks and Rangers parent Madison Square Garden Sports (-12.3%), related arena-holding company MSG Entertainment (-15.4%) and concessionaire Aramark (-10.6%) were notable losers as well.
The JohnWallStreet Sports Index is a 40-stock index meant to reflect the state of professional sports. The index was reconstituted at a level of 1,000 starting Aug. 1 as an equal-weighted index, meaning each component begins as 2.5% of the index’s value. The index posted a 46% gain from August through the end of 2020. With the start of January, the index had the first of its periodic, quarterly rebalances, where each component is reset to 2.5% of the index.
There are several requirements that components must meet to remain in the index. The company must trade in the U.S. (over-the-counter is fine) and have a market cap of at least $50 million. While a minimal level of trading volume isn’t essential, it must trade enough to be considered liquid and, more importantly with lightly traded OTC shares, the stock’s prices must track closely to daily prices on the company’s primary overseas exchange.