Are you ready for some football?
So sang Hank Williams, Jr. for the Monday Night Football theme for more than 20 years.
And based on all the buzz I’m hearing, a lot of folks are ready for some football.
The season kicked off Thursday evening with the reigning Super Bowl champion Kansas City Chiefs getting upset by the Detroit Lions. The remaining 15 games of this grand opening weekend come tomorrow and Monday.
Longtime readers know that I’m not a huge sports fan – except for hockey. I can talk all day about who might win the Stanley Cup this season.
But when it comes to picking a Super Bowl winner, I need help.
And that gave me a great idea for a cool way to make a few quick bucks… and have fun while doing it.
I’ve had great success picking winning stocks by relying on “predictive analytics” – which starts with massive amounts of data, and uses a systematized analysis to get down to the few moneymaking numbers that matter.
So I thought: Why not use that same approach to make an early-season wager on who will win this year’s Super Bowl? And if I could have the same probability of success as my quantum stock-picking system – it’s right 70% of the time – then I might be on to something.
And why not incorporate the latest-and-greatest analytical technology — artificial intelligence?
AI technology lets us analyze more data more precisely and faster than ever before. That’s why the whole world is turning to it – and why the massive AI boom has already created $5 trillion in new investor wealth.
I went right to the source that “kicked off” the whole AI craze. Surely this tech marvel has the mountains of data and the lightning-fast algorithms to analyze the teams, the players, the coaches, the stadiums, and all the “wild-card” variables that will spotlight the likely winner.
“Who will win the Super Bowl?” I asked it.
I’m sorry, but I don’t have access to current or future sports events, including the outcome of the Super Bowl for the 2023 season. The result of the Super Bowl is determined by the performance of the teams during the season and playoffs, and I don’t have real-time data or predictive capabilities to make such predictions. I recommend checking sports news sources or conducting your own research for the most up-to-date information on the NFL and the Super Bowl.
So much for that idea.
Fortunately, I’m happy to say, my M.A.P. system doesn’t give me the same “non-answer” when I check the stock and ETF rankings every morning.
Oh well. Sports betting isn’t my thing anyway. But it is for a lot of folks.
You can now make legal wagers in 35 of the 50 states – and in Washington, D.C. And the number of Americans planning to bet on the NFL jumped nearly 58% from last season to this one – hitting a record 73.5 million, according to a recent survey from the American Gaming Association.
Sports betting stocks have outrun the broader market this year. The Roundhill Sports Betting & iGaming ETF (BETZ) is up 20% here in 2023, versus a still strong 16% for the S&P 500.
With “peak betting” season on the way, what are the odds that betting on betting will make you money?
The 170% Gainer
When analyzing sports betting stocks, you have to start with the one that has left everyone else in the dust this year.
DraftKings (DKNG) shares have shot up nearly 175% here in 2023 — trading at nearly $32 – after bumping along at less than $20 for most of 2022.
That puts DraftKings in a whole different zip code than its handicapping rivals. MGM Resorts (MGM) and Caesars Entertainment (CZR) have had solid years – with gains of nearly 30%. Churchill Downs (CHDN) has underperformed, gaining only 13%. And Penn Entertainment (PENN), which is relaunching its sportsbook from Barstool to ESPN Bet, is down a painful 25%.
There is no “rising tide lifts all boats” when it comes to sports-betting stocks.
DraftKings, which features celebrities including Kevin Hart in its commercials, grew revenue 88% last quarter over the prior year. It was also the company’s first quarter with positive adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
DKNG has nice momentum right now. But that’s not the only factor in handicapping the odds of continued gains. The real test is what my M.A.P. system that we use in Quantum Edge reveals about the stock’s most predictive factors – fundamentals, technicals, and whether Big Money is interested or not.
And on that score, DKNG falls a little short. Here’s what it looks like in my system:
That overall Quantum Score of 63.8 isn’t bad. It’s a bit shy of the optimum buy-zone threshold (about 70). But on its own it’s not enough to scare me away from the stock.
And DKNG’s Technical Score of 85.3 is downright excellent. Given the stock’s big run this year, that strong technical number isn’t surprising at all.
It’s the fundamental number that gives me pause. The Fundamental Score of 33.3 is downright low – and tells me the company’s current financial muscle isn’t strong enough to give me confidence the stock will continue its run.
Sales growth is good, which is the reason for the current momentum. But bottom-line profitability has yet to follow that top-line growth. DraftKings’ losses have narrowed – but the company isn’t projected to achieve full-year profitability until 2025 at the earliest. And a lot can happen between now and then.
DraftKings’ debt level is also a red flag – especially since that burden is magnified when interest rates are high. The company’s debt/equity ratio is an even 100%, meaning the company is borrowing $2 for every $1 of equity.
Whether you’re talking sports betting or stocks, one thing is key: You need to have the odds heavily on your side. It’s hard to get that “edge” when you’re making an actual bet. The sportsbooks are pretty good at knowing exactly where to set the odds so they make money.
That’s why the “house always wins.”
And here, with DraftKings, the odds unfortunately just aren’t enough in your favor to make money on the shares.
The Smarter Bet
To put the odds firmly in your favor when investing in stocks, these three keys have the most predictive value:
- Fundamental strength: The best businesses with strong sales and earnings growth are the ones most likely to make you money.
- Technical strength: If Newton created an investing physics law, it would be something like, “Stock prices in motion tend to stay in motion.” New highs almost always lead to more new highs.
- Big Money interest: Institutional trading makes up between 70% and 90% of all daily volume. When Big Money is flowing into a stock, it can’t help but move higher.
That investing trifecta can elevate your odds of making money up to 70%, according to decades of use and back testing my M.A.P. system.
I especially like to buy the absolute strongest stocks in the sector Big Money is focusing on. And in 2023, technology leads the way. It’s where you find growth and innovation, and that’s not going to change for a long time.
And within technology, AI remains the true hot spot. The megacompanies like Microsoft (MSFT) and Google (GOOGL) are steaming full speed ahead with AI, but they’re each already valued at around $2 trillion.
My favorite AI investment is a smaller, lesser-known company that supplies servers and related equipment optimized for AI. It checks all the boxes for a stock that’s poised to move higher. It’s one of my favorite stocks in the entire market right now. And I just recommended it to my readers.
Oh, and if you want to place an early bet on the next Super Bowl winner, the Kansas City Chiefs opened the season as the favorites. But that may change with the Thursday-night loss to Detroit.
Just another reason that stocks remain the better “bet.”
Jason Bodner’s Power Trends