Ladbrokes in demand from the stock market's mug punters
Football results have been favouring the bookie and fuelling profits. However, this is not necessarily a good time to buy the shares
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Your support makes all the difference.The stock market has taken a big bet on Ladbrokes in the wake of results for the first half of the year that leapt ahead of expectations, compounding suffering rival William Hill’s misery in the process.
The numbers were released just days after the Competition Commission demanded only 400 or so betting shop sales as the price of green lighting Ladbrokes’ merger with rival Coral. Analysts had feared worse but the “Magic Sign” is pulling rabbits out of its hat with wild abandon.
Boo hiss. No one likes it when the bookie wins. Even less so when a chief executive like Jim Mullen smirks that “the sporting gods have generally been on our side” while reporting a £25.2m first half profit against last year's £51.4m loss.
They have too. Football more than made up for some heavy going in racing. The Premiership’s big guns, Manchester United, Arsenal, Manchester City, struggled for consistency in the first quarter of 2016. Their matches are often used as “bankers” by punters who favour multi-bet accumulators. They were anything but as the season reached its climax.
The European Championships kept the momentum going. England has long been the bookie’s best friend. The team has a habit of entering tournaments on a wave of optimism that time and again persuades naive punters to part with their cash. This is a case of lightening repeatedly striking in the same place. And yet they still come back for more.
The dreadful draws against Russia and Slovakia handed Ladbrokes a 70 per cent margin, an extraordinarily rare scenario. Other matches also proved to be happy hunting grounds. The final, for example, ended 0-0 in normal time. Draws are where bookies make hay.
Typically punters reign in their activity after results like these.
“History would strongly dictate that such a run of results in our favour would see customer staking suffer,” said Mr Mullen.
Not so this time: “Encouragingly these numbers firmly buck that trend and combine strong staking and a good margin.”
He did have a crumb of comfort for his battered customers: “130 years of experience in sports betting has shown us that we will endure a run of customer friendly results and margins will normalise.”
Translation: Please keep betting with us because the shoe will be on the other foot sooner or later.
And so it will. Bookies’ results have always ebbed and flowed with sporting results. The wonder is that the sort of people who gamble on the stock market don’t seem to get it.
When bookies say results have been in their favour, shares rise. When they go against them, shares fall. There’s a case for canny investors doing the opposite, selling on the rise and buying on the fall.
That isn’t a hard and fast rule. It’s worth noting that just as Ladbrokes is cheering sporting results, William Hill has been moaning about them. Hill’s has problems that go beyond having a bad Cheltenham, but complaining about jump racing's annual jamboree provided a convenient smokescreen.
That said, it’s still a good general rule of thumb. It seems, however, that the stock market is full of what are known in the trade as “mug punters”.
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