UPDATED FRIDAY FEBRUARY 5, 2010
This
was not a good week for stocks in general with the Dow Industrial average actually trading under the psychologically important
10,000 level and barely closing above 10K for the week. It was not a good week for the casino stocks either, with seven
of the eight stocks we follow all down on the week. But curiously, all eight of the casino stocks we follow are showing
huge percentage increases from 52-weeks ago, when the stock market was on its ways to the recession lows of March 2009.
Some of the 52-week changes are truly outstanding and make you wish that you bought these stocks exactly one year ago when
all the talk was about a possible depression in this country.
Las Vegas Sands, LVS is the stock symbol, is showing the biggest percentage change from 52 weeks
ago -- a gain of 353%. Wow. That's like hitting a stock market jackpot. But a year ago did you have the
guts to buy Las Vegas Sands? I didn't. The next biggest year to date percentage gain was with Isle of Capri Casinos,
ISLE is the symbol on the NASDAQ, as it had a change of 172% over the past 52 weeks. Wynn is third with a 134% gain
over the last 52 weeks.
But even
with strong 52 week gains, this past week was not good. The overall stock market fell, and so did almost all of the
casino stocks we follow here. In fact, six of the eight stocks fell in price this past week. MPEL, the casino
operator in China, had a price increase, which was its second weekly increase in a row. LVS managed a small 12-cents
gain.
We recently added to our stock
report here Melco Crown Entertainment which operates casinos in Macau and is traded on the NASDAQ under the symbol MPEL, and
Isle of Casinos which is another NASDAQ issue under ISLE. And WMS Industries which manufactures slot machines and video
gaming terminals and has the symbol WMS has been added. In all, we are following eight gaming stocks here.
2009 was a tough year for the gaming stocks because of the
recession but seven of the eight gaming stocks showed big percentage gains during 2009.
Despite the sell off this past week, all eight are now showing year to date
big percentage gains. And those year to date gains grew this past week because exactly 52 weeks ago their prices were
all very, very depressed.
Las Vegas
Sands was up 12-cents on the week and it is up a stunning 353% for the past 52 weeks, which is the biggest percentage gain
among the stocks followed here. Two weeks ago, LVS was showing a 52-week percentage gain of 180% and now it's almost
doubled. That means if you bought LVS a year ago, you've more than quadrupled your money. Investors are optimistic
about its turnaround in Vegas and its growth in Macau and in Asia, however the stock did have a price drop for the last several
weeks. Remember, that when you are looking at the 52-week percentage gains, you are looking at the very, very low points
of a year earlier.
Wynn, which also
has growth in Macau has a 134% gain over the last 52 weeks and this past week it was down 66-cents to $61.35 a share.
Boyd for the last 52 weeks is up 98% (it was up 58% last week)
but this past week Boyd was down 18-cents to $7.62 a share.
MGM Mirage has got its CityCenter project mostly open, but the high-end shopping mall has a lot
of vacancies, there is trouble selling and closing condominiums, and there is a glut of hotel rooms just when CityCenter is
opening new hotel rooms. This past week MGM was down 10-cents to $10.98 a share and for the past 52-weeks it is now
showing a gain of 84% which actually is an improvement over last weeks 52-week percentage gain of 38%.
IGT which is a diversified stock because it serves the entire
gaming industry including Indian casinos around the country is up 73% over the past 52 weeks and it lost 72-cents this past
week to $17.48 a share. IGT has unveiled a server-controlled gaming system at Aria in CityCenter which could be the
future for all casinos allowing casino managers to change games and coin-in limits to meet changing demands. But IGT
faces a struggle if the economy remains weak and casinos do not order new games and terminals.
Now our three new stocks that we also follow here on a weekly
basis. MPEL which is Melco Crown Entertainment and operates the big casinos in Macau. It's a low priced stock
closing 2009 at $3.36 a share. This past week it gained three cents a share to $3.54 following the previous week's gain
of $1.00 a share to close at $3.51 and for the past 52 weeks it is up 29%. It's a Chinese company that is traded on
the NASDAQ. It is close to a pure play on Macau. It's also a play on China. And at the price of three and a half
bucks a share it might be cheaper to "play" this stock than to play a low stakes poker tournament at your favorite
card club or casino.
The second
new stock that we follow here is Isle of Capri Casinos which is a casino operator and had a strong year with a 134% gain in
2009. It's also a low priced stock at $7.85 a share and this past week it lost 20-cents. Over the past 52 weeks,
its percentage gain has grown to 172%, almost tripling in price.
And the third stock is WMS Industries, the maker of slot machines, and gaming terminals for lotteries.
It closed 2009 at $40 a share and this past week it lost 48-cents to $37.08. It is showing a gain of 90% over the last
52 weeks.
Consider betting on the
casino stocks the same way you might play Roulette. Instead of putting all your chips on one of the 36 numbers (or 37
if there is a double-zero) in Roulette, you are likely to spread your chips among several numbers. You should do the
same with the casino stocks. Frankly, it's tough to say which one, if any of them, will turn out to be winners.
But if you are diversified you have a better chance of hitting at least one winner.
And if the economy improves quickly, you could have multiple winners and maybe
a jackpot or two. Besides, if you own stock in a casino you have these bragging rights -- you can say you own part of
the casino. Okay, that might be worth ten or twenty bucks, wouldn't it?
But here's another way to look at a bet on a casino stock: ten bucks will get you a passline bet
at craps or one share of MGM Mirage or Boyd Gaming. Your passline bet will be decided in about a minute or two and basically
you have about a 50% chance of winning. (Actually, you have slightly less than a 50% chance of winning because the house
has an "edge" or "advantage" of 1.4% on the passline bet.) The bet on the stock, on the other hand,
might not be decided for months or even years but if the action does not go your way, you can cash out without a total loss.
But when you lose that passline bet-- you lose it all.
Best
wishes, Alan Mendelson
