Consumers are starting to show signs of pulling back on spending in a number of areas. For a recession, that tends to mean a large slowdown in a number of high-cost activities, such as cruises or other vacations.
That also means that low-cost forms of entertainment tend to hold up well. As with low-cost food or beverages, demand remains much stickier, no matter how the economy declines. Investors who follow this trend can find profitable opportunities now.
One potential low-cost opportunity is in sports betting. Legalized online betting is only a few years old, and it’s still a trend in its early stages. It’s still coming off being halted as sporting events were largely kept on hold during the pandemic.
The early leader in the space is DraftKings (DKNG). Shares are still down 60 percent over the past year as the market has cratered. But revenue is up by 56 percent in the past year, and the company can potentially become profitable this year as the football season kicks off in the next month.
Action to take: Shares could be an interesting speculation here. They’ll continue to be volatile, but at current prices, the business appears to be trading at a discount to its growth potential.
The February $25 calls, last going for about $2.90, are an inexpensive way to bet on a move higher as football season unfolds. The options can likely deliver mid-to-high double-digit gains. With current market conditions, look for big swings either way to either add to the stake or take quick profits.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.