Although I love casino stocks for their connections to emerging markets, I must admit that they are highly speculative and risky. Political risks aside, multiples are very elevated right now over growth prospects. Many commentators, however, are now starting to doubt some of the initial growth expectations - particularly in Macau and the Asian markets. I still recommend broadly diversifying, and here's why:
Even MGM Resorts (NYSE: MGM), which I believe has the worst risk/reward, has had simply too much of a sell-off from weakening revenue trends in Macau. In the longer-term, China is heading towards greater prosperity; but, even if it doesn't, Las Vegas should shift investors's attention to something more promising. Over the years, MGM has entered the red, bled millions, and had little clarity in site for a recovery. Now that Las Vegas is returning to normalcy, albeit slowly, MGM will be the main beneficiary in room rates and convention volumes.
No comments:
Post a Comment