Is DraftKings Stock Too Extended? Here’s Your Chance To Buy In


DraftKings stock, one of this year’s hottest gaming plays, is extended after a 50%-plus run. But Roundhill Sports Betting & iGaming (BETZ) offers a way to buy in.

The $457.4 million fund invests in companies that operate in-person or online sportsbooks, online gambling platforms or that provide infrastructure or technology to those companies. It launched in April 2020.

As of Dec. 31, sportsbook stocks accounted for roughly 33% of total assets. Online gaming was next at 30%, technology 19% and the rest is other types of stocks. In terms of geography, the U.S. represented just north of 35%. Australia, Britain, Malta and Sweden were between 10% and 11% each.

The top 10 holdings, which account for about 42% of the 40-stock portfolio, include three U.S. stocks.

DraftKings Stock Still Soaring

Boston-based DraftKings (DKNG), which has made headlines lately, led with a 5.2% weighting. The online sports platform allows users to play daily fantasy games and win cash prizes. Shares soared 11% Wednesday, after DraftKings raised long-term profit and betting targets at an online investor day event.

DraftKings stock is well extended from a 56.08 buy point of a cup with handle, according to MarketSmith chart analysis. It’s rallied more than 50% so far this year.

Last month, DraftKings said it’s expanding its exclusive daily fantasy partnership with the NFL to Canada. Earlier this month, DraftKings announced a deal with the UFC to be its official sportsbook and “daily fantasy partner” in the U.S. and Canada.

And They’re Off …

Penn National Gaming (PENN), which owns or operates casinos, racetracks and online sports betting sites, is also a top 10 holding. The nation’s largest and most diversified regional gaming company has 41 properties across 19 states.

Shares are sharply extended from a 76.72 buy point cleared in December. They’ve also rallied more than 50% this year and are at new highs. IBD Stock Checkup assigns Penn stock an 83 Composite Rating, third best in the 29-stock leisure gaming and equipment group.

Caesar’s Entertainment (CZR), whose casinos include Caesar’s Palace, Bally’s and Harrah’s, has advanced nearly 40% this year. Shares, also trading at all-time highs, are far extended from a 60.18 buy point cleared in November.

Casinos got slammed in the coronavirus pandemic. Reno, Nev.-based Caesar’s posted losses the past five quarters. Sales growth has rebounded to triple digits the past two quarters, after three quarters of declines.

While DraftKings stock and these other hot gambling plays are too extended to buy, investors can access them via BETZ. The ETF is rebounding off its 10-week moving average, setting up a chance to buy or add shares. BETZ, up 26% this year through Thursday’s close, is easily beating the S&P 500’s 5% return.

The Roundhill ETF charges a 0.75% expense ratio.

Follow Nancy Gondo on Twitter at @IBD_NGondo


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