The House Always Wins : The Longs and Shorts of Casino Investment
This post was originally written as a conclusion to the previous post on the over saturation question, but it kinda deserves it's own space. In the interest of full disclosure, I do not own any gaming industry stocks, unless my 401k plan from previous former employer has some in a package I signed up for, but I doubt it.
If I had any money...
As an interested observer of the gaming bizness and a lover of the wager, be it blackjack, craps, slots, poker or the stock market, I'm always compelled by the possibility of 'owning a piece of the house' which is what you get if you invest in gaming companies. The oft-repeated credo 'the house always wins' is a fact. When discussing the statistics and house advantage percentages of various games, mathematicians always state that these odds are based on a sampling of thousands if not millions of iterations of a game. Baccarat players may go on bank breaking lucky streaks, but - over time - the house will win but should be tempered with the addendum 'over time' the casino will win 1.06% of every wager placed. The same rules apply to gaming industry investment, 'shorts' - people who don't hold onto stocks for too long - are, in this analogy gamblers, wagering on a weekend or month's worth of games. Longs - people who buy and hold stocks for longer term investments - are essentially the 'house' and reap the benefits of those guaranteed advantages over the long term. If you've spent more than a minute looking at any stock ticker message board, you've probably seen a major schism between shorts and longs. This usually devolves into flame wars and other infantile displays of bad taste... a reason why I gave up on participating in online discussion boards years ago (except ours, which is amazingly thoughtful and blissfully static free).
A look at the chart above shows that all of the companies seem to be on a downward slide, so I'd probably pick up a handful of WYNN, LVS, and MPEL. MGM seems to have weathered the industry-wide dip a bit better than the others so I'd pass on them. MPEL's loss of almost 50% is a bit worrisome though, but on the upside $10/share might be a very attractive price point to start building upon. At this price point, smaller dips in price cut deeper into the outlook for the company, which might putting them in danger of a takeover or at least major management shake up. As a whole, I'd buy and hold Macau gaming stocks slowly at first then pick up more shares as the industry as a whole tanks, which it has been since October's peaks.
The house always wins, over time.