There’s an old saw that says, as January goes, so likely will go the full year. It doesn’t have many adherents in today’s more complicated investment world, but it’s still fun to look at how this year’s first two weeks of trading went.
And, in general, they went pretty well.
More gaming stocks rose than fell. The big picture (that’s the macro view, for all those addicted to jargon) is encouraging, with trade agreements being approved with China and our North American neighbors, the job market still strong (even though it may be bumping up against its limits), gaming revenues inching up, and the Las Vegas convention business growing.
Two groups of winners stand out: gaming REITs and the Las Vegas-Macau casino operators.
Among individual companies, Churchill Downs and PointsBet continue their extraordinary runs.
Churchill Downs doesn’t get as much attention as the big-name gaming companies, but it rose 4.93 percent in the first two weeks after rocketing 68.74 percent last year. It now sports a not-to-be-sneezed-at market cap of $5.7 billion.
And, while all of that has Churchill Downs at hefty valuations like 40 times trailing price-to-earnings ratio, some observers, such as Jefferies equity analyst David Katz, say the stock is worth the price, given all of the company’s growth projects.
PointsBet is a less-than-five-year-old sports betting product provider that does business in New Jersey and its homeland of Australia. PointsBet is up a hefty 31.4 percent in the first two weeks following a giddy 139.5 percent surge last year and now has a market cap of $732 million.
Yet another company continuing a long-term run is Aristocrat, up 9.5 percent after gaining 54.17 percent last year and rising 16 fold since 2008.
The three gaming REITs have been on a roll thanks to their dividends, defensive nature, and continuing acquisitions. None of that is going away.
Here are their first two-week gains and last year’s runs:
- Gaming & Leisure Properties | +5.1 percent | +33.24 percent
- VICI | +3.8 | +36.05
- MGM Growth Properties |+1.3 |+17.27
The Las Vegas-Macau operators have been responding to the expectation that Macau will bounce back this year, especially on the mass-market side, though the decline in VIP play is a counterforce that shouldn’t be blithely discounted.
Wynn, the most exposed to VIP play, is nonetheless the biggest gainer among the trio, up 9.6 percent through January 16. Las Vegas Sands, the expected biggest beneficiary of the anticipated mass-market growth, rose a healthy 6.4 percent. MGM Resorts, despite the hoopla over its focus in Las Vegas on maximizing profit and monetizing its real estate, rose just 2.3 percent.
More broadly, the Fantini North American Gaming Index rose 4.78 percent in the first two weeks, beating the major indices.
As might be expected, the optimism over Macau shows up in stocks of pure Macau plays that trade in Hong Kong, with all five of them up, including double-digit gains by MGM China (13.5 percent) and last year’s laggard, SJM, up a leading 16.8 percent.
Interestingly, despite all the excitement over U.S. sports betting, many betting companies got off to a slow start, in part responding to conditions and events in their home markets, the U.K. and Sweden.
Among them, William Hill and Flutter were down 0.48 and 0.46 percent. Last year’s high-flier, GAN, was off 10.74 percent and Kambi slipped 2.3 percent. Only GVC stood out, up, 5.61 percent.
