Question of the Day - 14 April 2023

[Editor's Note: This answer is written by longtime Las Vegas business writer and our Stiffs & Georges blogger David McKee. We should also say that it's purely based on stock analysis and not at all on the image that many LVAers have of these companies.]

That’s a tricky question and I answer it with trepidation. Don’t hold me accountable, please, if the stock market plays you foul.

One possible starting point is to answer your query with a question of my own: What do you hope to achieve with your investment?

If you’re trying to get rich quick (which I don’t recommend), there’s always DraftKings, whose ticker symbol is DKNG. It’s a volatile and unpredictable stock. For instance, CEO Jason Robins and co-founder Matthew Kalish dumped almost 300,000 shares on the market on March 27, right after Robins went on to Twitter to proclaim, “I’ve never been more confident about DraftKings’ future.” This insider pump-and-dump juiced DKNG shares from $17.72 to $18.76 apiece.

But … DraftKings is 90% controlled by Robins, which gives him an incentive for the company to do well, but also to do what’s in his best interest, not yours. In addition, the stock has traded as low as $11.05 a share and the company is still years from profitability, so invest with caution, if at all.

One stock that's no longer flying under Wall Street’s radar is Boyd Gaming (BYD), which as of this writing (in late March) trades at $63.90 per share. Analysts have long complained that Boyd is undervalued by the Street and the share price has definitely perked up of late. Boyd has exposure both to major gambling markets like Las Vegas, Philadelphia, and New Orleans, but also a far-flung regional-gaming setup. That, combined with its heavy Las Vegas locals-casino presence, enables one to hedge bets against a regional or local economic downturn.

If BYD is a bit rich for your wallet, Station Casinos (RRR) is more affordably priced at $44.20 a share. Like Boyd, it enjoys Wall Street’s favor these days for its sound fundamentals and a steady growth strategy. The only caveat is that Station is exclusively exposed to the Las Vegas Valley, a good thing at present, but a bad thing in the 2008 recession, when the company nearly went bust. Still, RRR is a solid performer these days.

Speaking of being in favor, that’s something that’s no longer the case for Penn Entertainment (PENN). Once valued in the mid-$40s, it has tumbled to $29.55 a share. Wall Street doesn’t like Penn’s heavy exposure to almost exclusively regional markets, with only a modest foothold in Las Vegas (M Resort) and none in Atlantic City. PENN might represent a good bargain play if you have reason to believe that non-Vegas casinos will rebound strongly this year.

As for the quartet of blue-chip stocks, Caesars Entertainment (CZR, often erroneously referred to as CET) has a Boyd-like mix of Las Vegas and regional play, with the added benefit of being on the Las Vegas Strip in force and the drawback of being an also-ran in the Atlantic City market. Another factor to consider is the company’s highly leveraged condition, the consequence of the Eldorado Resorts takeover. Were the economy to go south, Caesars might be a bad bet. It presently trades at $48.35 a share.

Completely unexposed to U.S. markets these days is Las Vegas Sands (LVS), which is devoid of American assets. That could change if it's granted a casino license in either New York state or Texas (preferably both), but both are years away from fruition. The meantime looks pretty good. Sands’ exposure is to two markets, both of which are doing very well at present: Macau and Singapore. The latter remained strong even during the pandemic, while Macao has rebounded off the mat much stronger than Wall Street expected. Sands trades at $57.05 a share.

I do like Sands’ rosy prospects, but if you’re leery of relying on two overseas markets all by their lonesome, MGM Resorts International (MGM) is probably the stock for you. MGM has an enormous Las Vegas-facing convention-oriented presence, which has fueled the company considerably in the runup that has followed COVID. Business is very good and MGM has three of the four top-performing non-tribal casinos east of the Rockies: MGM National Harbor in Maryland, Borgata in Atlantic City, and Empire City Yonkers, which could be upgraded to full casino (i.e., with table games) status soon. MGM also has a strong foothold in Macau that's getting stronger, with the only drawback being the company’s insistence on throwing billions of dollars after the chimera that is the prospect of casino megaresorts in Japan. MGM trades around $44.30 these days and I'd consider it "affordable."

Finally, if you have $111.20 a share to splurge on a stock, one company is always a good investment: Wynn Resorts (WYNN). It’s enjoying record-high room rates at Wynncore on the Las Vegas Strip, dominates the Massachusetts market, and is a steady performer in Macau. What’s more, the company continues to diversify geographically, now expanding into the United Arab Emirates, where it's developing a $3.5 billion casino-megaresort. From there, it will be able to tap into 9 million UAE-residing expats and 22 million tourists per year. If you can afford them, Wynn shares are a genuine asset to your portfolio.