Forget a Cash ISA! I’m betting on the GAN share price in 2020

I have never been a fan of the Cash ISA. The rate of inflation is higher than the rate of interest, which means our hard earned cash is slowly eroding in value every single year. If I put my money in a Cash ISA and I can buy less with it in a year, then that doesn’t seem like a very good deal to me. Cash ISAs deliver negative real returns! 

I have always been involved in the stock market, because of the proven value the stock market builds over time. I haven’t always made the correct calls – but I’ve learned from my mistakes over the years. 

That’s why this year, I’ll be betting my money on the GAN (LSE: GAN) share price instead. 

Why would I buy shares in GAN? 

GAN is set to benefit hugely from the legalisation of US sports betting in 2018. Although progress has been slow, so far 16 out of 50 US states have legalised sports betting. GAN provides a technology stack for bigger companies that have the reach and clients. GAN isn’t a gambling company, but creates the technology for gambling companies to use. 

As more and more US states legalise sports betting, the available market for these gambling companies grows, as does the market for GAN. 

GAN is profitable and growing

The company grew revenue 145% to £11.3m from £4.6 in its first-half results, and reported a profit after tax of £0.7m. Profit is not everything though; cash flow is what matters. The business generated just over £3m in operational cash flow.

This is important because it means the company is not reliant on external funding. GAN produces enough cash by itself to invest in growing the business and building its cash pile. Buying shares in a stock that isn’t capable of doing this is a bet on the company’s cash balance lasting until they can become profitable. 

Strong management ownership 

At least 25% of the company is owned by the Smurfit family, who also own Smurfit Kappa Group. With such a large interest in the company’s success, one can assume that chief executive Dermot Smurfit is working hard to achieve it. 

When I invest in a company, I always like to see three things: a growing market, profit and cash flow, and directors having skin in the game.

When directors see their own personal wealth tied to the share price, they are much more likely to act in the best interests of the company, instead of using the company for their own personal gain at the expense of shareholders. It aligns the interests, and 25% is a healthy amount. 

I believe that (so long as the investment case does not change) we could see further upside in GAN’s share price over the coming years.