QUANDARY: We’re in such an uncertain time between inflation and war and the possibility that one or both of them will get out of control with consequences we can’t imagine. What are we to do?
BULL: Stay long. Buy commodities. Take advantage of the fear of others.
BEAR: Well, Bull, I don’t often agree with you, but I’ll go with buying commodities. With likely worsening supply shortages and uncontrolled inflation, owning tangible assets that actually increase in value is the only way to go. Otherwise, sell out and sit out.
BULL: Gaming REITs fit that profile, and with significant dividends, too.
QUANDARY: What about other gaming stocks?
BULL: Buy, boy, buy. Las Vegas is on fire. Consumers want to spend. Group business is coming back. So are older customers. The sports betting-iGaming revolution continues.
BEAR: Whoa there, Bull. Six-dollar a gallon gas might cause some of those southern California customers to stay closer to home. As for group business being back, we keep hearing all the happy predictions but continue to see convention attendance way down. Group recovery might take longer than expected.
We’ll get a better sense when companies hold their first-quarter conference calls. Don’t be surprised if some of them cut guidance, or at least express caution for the balance of this year.
QUANDARY: That’s what worries me. Everybody sang such bullish songs on their fourth-quarter conference calls, but now we have all of these big question marks hanging over our heads.
BEAR: Bingo, Quandary! I think you’re finally getting it.
A war that could go nuclear At least will further disrupt supply chains. The worst inflation in two generations, getting who-knows-how-bad. Maybe a steep Fed-forced recession to quell it. That’s not a recipe for prosperity, no matter how much casino bosses brag about their cost-cutting.
BULL: Okay, things are uncertain and everything could go to hell. But there’s an expression making the rounds and for good reason—don’t bet on the end of the world. It only happens once, and the odds are against it.
BEAR: Once is all you need, Bull. Look, let’s be realistic. Stocks have been selling off. Every major index and all the Fantini Gaming Indices are down year-to-date, and we haven’t even begun to deal with these uncertainties.
BULL: Yes, and a sell-off is a buying opportunity. Look at how far the sports betting-gaming stocks like DraftKings and Rush Street Interactive and others have fallen while the industry grows exponentially.
BEAR: Yeah, and look at how their losses are piling up, too. You have to make money at some point, not just promise to.
BULL: But the business is there. Maybe some of the stocks won’t come back, but a case can be made that they’re cheap now compared to their revenue prospects. That could bring out buyers.
BEAR: You can play that game if you want to: buy a fallen stock that might get cheaper because some company someday might acquire it in a steal. I’ll stick to looking for profitable companies with good prospects. Maybe like Churchill Downs, which saw the wisdom of not losing money on digital and instead is committed to making money by sticking to its knitting.
BULL: Or a Caesars or Penn National that have the financial strength and diversity to make it through to the day digital becomes profitable.
QUANDARY: Bull and Bear, this sounds like a rare area of agreement. Let’s end on that note.
