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Basket 4 ETFs to Tap March Madness

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The start of the 2017 National Collegiate Athletic Association (NCAA) Division I Men's Basketball Tournament has spread “March Madness” and millions of Americans are seeking to capitalize this opportunity by enthusiastically filling in the brackets. This is especially true as the championship leads to a buying frenzy on the Wall Street if we go by history.

The S&P 500 index has gained 2.2% on average over the course of the game during 10 of the past 11 tournaments. The year 2017 seems no different as the current bull market turned eight on March 9 and is extending its rally driven by Trump and Fed (read: The Best Performing ETFs of the Bull Market Might Surprise You).

Being the biggest modern sporting event in the U.S., the championship is a money-spinner for media networks (TV, digital and social media) and advertisers, attracting billions of revenues in three weeks.

Media on Roll

The two TV media conglomerates – CBS Corporation CBS and Turner Sports – continued to score the highest revenues from the event by broadcasting through four networks CBS, TNT, TBS, and truTV. Total viewership for the tournament increased 10% year over year at an average of 9.325 million over the first four days this year and has been the most-watched in 24 years, as per CBS and Turner. In particular, the eight second-round games aired on March 19 on CBS, TBS, TNT and truTV averaged 11.9 million viewers compared to 8.9 million viewers last year.

As per Kantar Media, the NCAA championship generated about $1.24 billion in total advertising revenues from national television in 2016, up 4.7% from 2015. As such, the event only trails $1.318 revenue generated from the NFL playoffs.

With the rise in fans and NCAA fervor, March Madness streaming access is available on 15 different platforms for the first time this year with Live app on Amazon (AMZN - Free Report) Alexa and Xbox. Also, Turner’s video streaming service iStreamPlanet will provide infrastructure for every game also for the first time. Further, social media sites like Facebook FB, Twitter TWTR, and Snapchat SNAP are attracting fans to their respective platforms via media deals with the NCAA or Turner Sports (read: ETFs to Add After Snapchat's Blockbuster IPO).

Apart from media, the contest is a boon to the casino industry. According to the American Gaming Association – a national trade group that represents the casino industry – March Madness could pour in $10.4 billion into the industry with 40 million fans gambling on 70 million brackets. This is up 13% from last year. Only 3% will be wagered legally through Nevada sports books while the remaining $10.1 billion will be placed with offshore sportsbooks and local bookmakers.

How to Play?

As the tournament is a high-seeded top-line driver for media and networking players as well as casino industries, investors can basket some gains by jumping into the ETFs in these spaces. Any of the products mentioned below could make for an exciting March Madness play given that these have a favorable Zacks Rank of 3 or ‘Hold’ rating and exposure to fan frenzy.

PowerShares Dynamic Media Portfolio PBS

This fund tracks the Dynamic Media Intellidex Index and seeks to offer capital appreciation by investing in companies that are selected on a variety of investment merit criteria. The approach results in a small basket of 30 media stocks with none of the firms holding more than 5.3% share. Within the media sector, cable & satellite and Internet & mobile applications take the top two spots with 21% share each while publishing, television & radio, and movies & entertainments round off the top five. The product has amassed $149.4 million in its asset base while trades in a light volume of about 47,000 shares a day. The ETF charges 61 bps in annual fees (read: How Consumer ETFs Crushed the S&P 500 Bull Market Run).

Global X Social Media ETF SOCL

This fund provides access to social media companies around the world by tracking the Solactive Social Media Total Return Index. It holds 34 securities in its basket with double-digit concentration on the top three firms – Tencent, Facebook and Twitter. Other firms hold less than 4.8% share. In terms of country exposure, U.S. firms take about half of the portfolio, followed by China (28%) and Russia (9%). The fund has $85.4 million in AUM and average daily volume of about 84,000 shares. Expense ratio comes in at 0.65%.

VanEck Vectors Gaming ETF BJK

This ETF provides investors’ global exposure to the casino gaming market. It follows the MVIS Global Gaming Index, holding 40 securities in its basket. It is moderately concentrated across components with each holding no more than 7.1% of assets. In terms of country exposure, U.S. takes the top spot at 37%, followed by Australia (16%) and Hong Kong (10%). It has been overlooked by investors as depicted by AUM of $20.4 million and average daily volume of roughly 6,000 shares.

PowerShares Dynamic Leisure and Entertainment Fund PEJ

This fund tracks the Dynamic Leisure and Entertainment Intellidex Index and holds a small basket of 30 U.S. leisure and entertainment companies. It is pretty well spread out across components with each holding less than 5.5% share. Though hotels & leisure facilities and restaurants dominate the fund’s portfolio, television & radio, Internet & direct marketing, casinos & gaming, and cable & satellite make up for one-fifth share. The ETF has amassed $125.6 million in its asset base and trades in a light volume of 40,000 shares a day on average. It charges 61 bps in annual fees (see: all the Consumer Discretionary ETFs here).

Bottom Line

Most of these products have been marching higher over the past few days, crushing the broad market fund SPY by wide margins. This trend is likely to continue given the ongoing March Madness and the huge revenue generation scope for media, advertisers and casinos.

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