October 30th, 2021
How I made $5K on a crooked roulette wheel
fubotv-stocks

Dear Rebel Investor,

The wheel went ‘round… and ‘round… and ‘round.

It finally stopped on black 8.

Winner!

I was betting that a black number would come up.

It was the third time in a row that had happened – and the third time in a row that I’d won.

My first bet was for $5.

The second, for $10.

The third, $20.

As you can see, I was using a doubling sequence.

What I did was double my bet to $10 after a winner, and double it to $20 after another winner.

After three winners, I’d keep the wager at $20 until I lost.

Then I’d revert to my original $5 wager, and repeat the doubling sequence after hitting a winner.

And I would NEVER double more than twice in a row.

This betting pattern was part of a system a friend and I developed for a casino roulette wheel.

It worked like a charm.

See, my friend had discovered that the wheel was “crooked.”

But it wasn’t a real roulette wheel.

It was online, and my friend had found that there was a bug in the online casino’s software.

That bug caused black numbers to come up about 60% of the time.

Boy, did we take advantage of that bug…

My friend won over $10,000 from it.

I hit for $5,000.

Not long after those paydays, that online casino shut down.

(I guess we weren’t the only people who had discovered the bug.)

This all took place in the late 1990s.

Back then, if you wanted to gamble online, you had to go through an off-shore casino.

That’s because online casinos were illegal in the U.S. at the time.

But that changed in 2011 when…

The U.S. Dept. of Justice allowed states to decriminalize online gambling

Things got even better for online gamblers in 2018.

That’s when the U.S. Supreme Court revoked the federal ban on sports betting.

Now a dozen states allow it.

More are sure to follow.

The reason – there’s just too much money at stake.

Right now the online gambling industry is worth about $72 billion annually.

According to a Research and Markets report, it should grow to $92.9 billion by 2023, and to $112 billion by 2025.

How much of that growth will come from legal online sports betting?

That remains to be seen.

But a 2018 report by Ibis World, an industry market research firm, offers a clue.

It says if sports gambling were fully legal in the U.S., it would be a $55 billion a year industry.

I’d wager that online sports betting would be worth a healthy chunk of that.

Especially when you consider that…

Illegal sports betting in the U.S. is already worth about $150 billion annually

So says the American Gaming Association.

They say another $5 billion comes from legal sports betting every year.

That $5 billion is sure to grow as more states legalizing gambling on sports.

Consider these points:

  • 25% of U.S. residents live in a legal sports betting state
  • By 2024, that percentage will double because many more states are likely to pass legalized online sports betting over the next three years

 All of this points to an explosion in the growth of online sports betting.

Right now the big boys rule the world of online sports gambling

Two of the biggest players are DraftKings (Nasdaq: DKNG) and privately-held FanDuel.

As of this writing, DraftKings has a market cap of about $25 billion.

That makes it a large-cap stock.

Plus it’s gone from $19.35 to about $60 since it went public in April 2020.

So what we have here is a large-cap that’s tripled in about a year and a half.

That’s too far, too fast for my money.

As for FanDuel, it may well go public in the next few months.

But since the company has an enterprise value of $11 billion, buying that stock would also amount to a large-cap play.

I don’t like playing large-caps because it’s much harder for them to go up quickly.

I’d rather bet on smaller companies because they have far more potential upside.

One interesting small-cap in online sports gambling is Fubo TV (NYSE: FUBO).

Why Fubo TV could be a profitable play on online sports betting

Fubo is a roughly $3.8 billion company that runs a TV streaming service for sports events in the U.S. and Europe.

And it plans to launch a sports book during Q4 2021 that will allow you to bet on sports through your TV.

How cool would that be?The idea, of course, is that expanding into sports betting will draw more subscribers to Fubo’s platform.

Fubo plans to use a new app that would essentially combine data from both its streaming and gambling sides to induce people to bet.

For example, consider a viewer who typically only watches hockey games in the third period.

That viewer might, as he’s watching something else, get an alert that a hockey game is about to enter the third period.

Or take an NFL fan who likes to bet on field goals.

This viewer might be able to flip between games when teams are in field goal range. 

The possibilities for online sports gambling through Fubo are endless.

Already the company is educating and training viewers with free-to-play games.

And it’s secured market access agreements in Iowa, Arizona, Pennsylvania, Indiana and New Jersey.

This all sounds good from an investment standpoint, right?

But there are risks with this company…

Why Fubo could come up snake eyes for investors

The biggest problem?

It’s like a cable company.

Cable companies like Comcast (Nasdaq: CMCAS), Verizon (NYSE: VZ) and AT&T (Nasdaq: T) bundle dozens of channels for a monthly fee.

In Fubo’s case, it offers more than 100 sports channels for $65 a month.

The problem is people are getting sick of paying a monthly fee for a la carte channel bundling.

That’s why 5 million Americans cut the cord to cable in 2020.

Even more did so in 2019 (5.8 million, to be exact).

This anti-cable trend could spell trouble for Fubo.

The company also faces stiff competition for online sports gamblers.

That competition includes the likes of DraftKings, FanDuel and Caesars Entertainment (Nasdaq: CZR).

There are many more gambling heavyweights for Fubo to contend with.

The bottom line? Betting on Fubo is a high-risk, high-reward play

The company might succumb to the anti-cable trend.

Or it could get overwhelmed by richer competition.

But if Fubo can leverage the data it gets from both streaming and betting, it could be a home run for those who get early.

Like it was for me with that crooked roulette wheel.

That’s it for this issue of Dear Rebel Investor.

Your “all-in” analyst,

Doug Fogel
Contributing Editor, Dear Retail

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