Avoid “Fun” Casino Stocks (WYNN, LVS, MGM) for Now
The S&P 500 squeezed out a 1.05% gain in May despite economic data that showed a contraction in the U.S. Gross Domestic Product (GDP) for the 1st quarter of 2015. This gain was due to the hope that 2015’s 1st quarter GDP contraction would be transitory and not last. Instead, the stock market focused on what better results the rest of the year might produce with a dollar that shows signs of weakening so that U.S. exporters can produce better profits, and a jobs market that is showing stability and reliable improvement. It remains to be seen if some catalyst might drive a 3-5% correction for the summer trading months, which historically show negative stock market results. Despite this backdrop, we suggest no changes to our TSOA Retirement Account Model Portfolio asset allocation.
Can Las Vegas and Casino Stocks Rebound? Don’t Believe It!
My wife and I made our requisite once-in-a-lifetime visit to Las Vegas last month. After thoroughly enjoying an 8-day Caravan Tours jaunt through Arizona and Utah, including the Grand Canyon, Lake Powell, Bryce Canyon and Zion National Park, we decided to spend 5 days in Las Vegas to “experience” what this “gambling mecca” was all about. Truthfully, Las Vegas is facing an identity crisis brought on by the Great Recession of 2007/2008, and it has not recovered since (and may not for the near future).
The problem with Las Vegas is its desire to be “all things to all people” by trying to address all of its potential markets. It’s a “gambling mecca,” a “favorite family vacation destination,” a “24/7/365 party paradise,” a “restaurant/foodie heaven” (with world-famous chef restaurants), a “boxing/sports arena,” a “high-class shopping forum,” and a “global star-studded and live shows center (a la Cirque du Soleil’s 8 permanent shows). It does meet some elements of all of its desired goals; however, Las Vegas has unfortunately experienced only limited success for each of them. In addition, the markets that can support these offerings are often competing and cancelling out each other. For example, family-oriented visitors who love the shows hate the extreme smoking conditions in the casinos that they must endure to reach the live show theaters. Also, while young party goers have found Las Vegas to be their new “cool” scene, they don’t generate the high gambling revenues and other high price spending that mature wealthy visitors bring.
Las Vegas has in fact had an increase in the number of visitors; however, this factor alone does not always translate into higher revenues or profits for the casino operators. And gambling accounts for over 40% of Las Vegas revenues and 80% of the profits. Finally, competition for gambling options is coming from the rapidly expanding cruise ship industry (non-smoking too!) and U.S. states that want gambling revenues to stay local. What is the real Las Vegas and what are the attractions that can bring back the big spender crowds with repeat visits? These questions remain seriously unanswered.
Avoid Wynn Resorts (WYNN), Las Vegas Sands (LVS), and MGM Resorts (MGM)
These are the three major casino operators in Las Vegas which may qualify under our definition as “fun stocks.” While the S&P 500 has gained 134% since December 31, 2008, all three of these stocks have shown poor performance since hitting their historic highs with the following stock price losses:
- WYNN: -54.7% since March 31, 2014
- LVS: -68.8% since October 30, 2007
- MGM: -78.1% since October 31, 2007
Despite some potential short-term bounces due to merger rumors or small rebounds going forward, we do not believe these “fun stocks” would make good long-term investments. Therefore, it would be best to avoid adding them to your Fun Stock Portfolio until further alerts from InvestBetterSpendSmarter.com (IBSS). To receive these free alerts, please register here.
Love Trump Towers International
We were most fortunate to reserve a 4-night stay at the Trump International Towers very near the Las Vegas Strip through Priceline’s Express Deals with an outstanding offer ($105/night, which is over 75% cheaper than comparable rates at other similar quality Las Vegas hotels). Trump is the only 5-star non-smoking hotel in Las Vegas, primarily because it does not have a (“deadly” smoke-filled) casino. As non-smokers who hate secondary smoke, we found this to be a most ideal and pleasurable stay.
We also received a very generous complimentary upgrade by truthfully mentioning at check-in that we were celebrating our 36th anniversary. Our upgraded room was a one-bedroom suite on the top floor with a terrific view of the Las Vegas Strip. With such a fabulous view, we could have been content to stay in our room. Happily, we did see two great shows (Cirque du Soleil’s phenomenal KA and LOVE), and two good performances (Penn & Teller and Vegas, the Show), and we did walk through most of the typical Las Vegas Strip hotel tourist attractions. The staff of the Las Vegas Trump Towers was excellent and very helpful, and we would definitely – without a doubt – stay there again, even without the complimentary upgrade.