Want To Beat The Odds? Take A Stake In A Bookie Or UK Casino
Gambling is often said to be the fastest way of parting a fool from his money. But according to fund managers, there is a way to profit from gambling: buy shares in the companies that run the UK casinos and betting shops.
Five of the self-made billionaires listed on the Fortune 400 list are casino owners. One of the five, Steve Wynn, says simply: "If you want to make money from casinos, the answer is to own one."
However, we are talking global investment here. As Helen Driver, investment director with Standard Life Investment’s UK equity team points out, at present too much uncertainty surrounds the UK casino industry because of the gambling white paper currently in select committee stage at Parliament. So investors should look for casinos outside the UK for the time being if they want to share odds with the house.
Driver is, however, enthusiastic about UK betting shops. Decidedly so. She holds William Hill and Ladbrokes, via parent company hotel group Hilton. She said: "When William Hill floated in June 2002, the share price was £2.25 today its £5.50."
There are several reasons for the growth. Betting is no longer all about whippets and horses, having diversified out of these traditional areas into general sports betting. She points out that the bookies will have cleaned up in the past month as favourite after favourite went out of the European Championship. Indeed, football betting has become a high-growth area for betting firms.
It is now also possible to place a bet on the outcome of a television programme such as reality show Big Brother or star search programmes like Pop Idol.
The bookies have also benefited from a legal ruling that allowed them to put sophisticated gaming machines into their premises. To the dismay of UK casinos, bookies now have roulette-type fruit machines after they were deemed to constitute fixed betting.
Many have also put in virtual greyhound racing machines. The thinking is that a punter will pop a £1 or two in the virtual race machine while he waits on the result of a horse race in which he has placed a bet - with an obvious uplift for the bookie’s bottom line.
Edinburgh-based Crispin Longden, manager of the ISIS European Assets Trust, likes Paddy Power, the Irish bookmaker, in part because it has managed to market itself to punters as the honest bookie playing fair by offering bets that wrap in an extra chance of payout. He said: "They have a unique model, which encourages recycling by being quite interesting with odds."
For example, the group will take a bet on so and so to win the US golf open but will team it with a promise to return the initial stake if, say, Tiger Woods wins.
UK casino and gambling punters have benefited from an increase in perceived fairness as well since the removal of betting duty. Driver points out that while previously many resented the 9p in every £1 bet that went to the government - now that the bookies pay this - punters feel they are getting more for their money. Both Driver and Longden think the strong growth will continue, especially once the effect of the new routes to market are factored in.
The advent of phone and internet betting means that the world of betting has been opened up to a class of punter that would never have set foot in a bookies. The establishment of online casinos such as Spin Palace Casino is another development being watched by fund managers.
The dividends paid by betting firm have been consistent, in the case of William Hill, and have seen impressive growth of 20 per cent a year in the case of Paddy Power, which has a 30 per cent share of the Irish market and ambitions to take on the UK players.
