Is This Sports Betting ETF a Good Bet Before March Madness?

Well, what odds do you give me that the Roundhill Sports Betting and iGaming ETF (BETZ) gains 15% from its Wednesday close of $18.20 before losing 15%? On the surface, that’s what my ROAR score is intended to do: balance the potential for returns and the risk of significant losses.

And for this basket of stocks from international casinos, online gambling companies and others dedicated to taking our money (I mean, gambling) on ​​games, the chart seems to offer an intriguing proposition. First, let’s review what BETZ is and then discuss its future path. After all, the NCAA March Madness college basketball tournament, a betting bonanza, is just weeks away.

BETZ has been around since June 2020, meaning it debuted just in time to catch the historic wave of consumer interest in online gambling. We were all stuck at home and, along with day trading, sports betting entered its golden age.

BETZ has had a checkered history when it comes to performance. Your chart looks like a typical evening at a casino table. Have a good night! Up, down, sideways, but in the end, the gains made simply disappeared. And you can’t remember why.

This exchange-traded fund (ETF) faces a complex narrative. Strong industry growth collides with intense market competition, including prediction markets, and changing regulatory landscapes. With just over $50 million in assets, BETZ reflects the small nature of its component stocks, which include some large-caps, but no standard mega-caps.

What I have found interesting about this ETF over the years is that it provides a pure look at an industry that is rapidly moving from physical brick-and-mortar locations to mobile platforms. The way I see it, BETZ is more about touching on an evolving topic with a single ticker.

The ETF owns about 30 stocks, and for a fund that size in terms of holdings, it’s well distributed. This shows all holdings with a minimum weighting of 3%. That represents exactly half of the 32 names in the ETF. In today’s heavier market, that’s a good balance.

The fund’s composition reflects the global nature of the gaming market, with more than 80% of its holdings in developed markets. These companies are increasingly leveraging technology to drive participation, particularly through high-speed 5G connectivity that enables real-time odds updates and micro-betting features during live events. The fundamental story of secular growth remains intact: Americans are expected to spend billions on legal gambling and global iGaming revenues are projected to grow steadily through 2030.

Regulatory developments remain the main catalyst for BETZ’s future. Many US states have legalized mobile betting. However, several large markets like Minnesota remain at a legislative impasse, which could leave billions in revenue on the table. And the aforementioned emergence of prediction markets, which operate under federal rather than state oversight, adds to the competitive threat. On the other hand, the industry is expanding to emerging markets such as Brazil, which recently opened its doors to regulated digital betting.

I’m adding this weekly chart to the daily one I started this article with. Because the newspaper tells me that the $17 to $18 area is a very familiar rebound place for BETZ. And essentially it’s there again.

But the weekly does not confirm that optimism, at least not yet. The 20-week moving average is in a strong downtrend. Translation: a bounce is much more likely than a low-risk, long-term profit opportunity.

Finally, I think it is only fitting that this article about a digital gambling ETF closes with an image full of red and black colors. This is the recent trajectory of BETZ’s ROAR score.

It turned red in mid-September around $25 per share, which was helpful given the ETF’s 35% drop through February 13 of this year. Still, he flirted with green (lower risk) during that time. This reminds us that stocks and their baskets, i.e. ETFs, are not as binary as “buy” or “sell.” Whenever the red zone is in play for a while, any immediate jump in ROAR score (to a lower risk zone) should be met with at least modest skepticism.

Currently the score of 20 makes sense to me. Because it indicates exactly what I see on the daily chart I showed at the top. This ETF still has a lot to recover. But that’s also where the biggest advantage begins. I see it all the time. That’s why a low ROAR score doesn’t mean a “sell,” a “buy,” or even a “hold.” It simply means that while there could be big gains around the corner, it is a more aggressive move than average to take on that size.

Rob Isbitts created the Roar Scorebased on his more than 40 years of experience in technical analysis. ROAR helps DIY investors manage risk and build their own portfolios. To view Rob’s written research, see ETFYourself.com.

On the date of publication, Rob Isbitts had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com