The stock market has been a wild ride for months now, led by the crash of the so-called meme stocks, with DraftKings the most notable name in gaming.
Much of the market’s volatility has resulted from manic-depressive reactions to every tidbit of news and speculation about inflation and its old friend in angst, the future of interest rates.
Now we have a major land war in Europe with dangerous saber-rattling by the Russians about possible escalation into a nuclear conflagration.
So, what’s an investor to do?
For traders and short-term investors, there’s plenty to do, from trying to capitalize on soaring oil and commodity prices, to rushing in search of inflation hedges, to buying war-time stocks like arms manufacturers, to sticking one’s head under the pillow and hoping all the crises go away as the Covid pandemic appears—cross our fingers—to be doing.
But for long-term fundamental investors, the plan is much simpler: proceed as always, finding and buying good companies at good values.
There are two likely results from the Russian invasion of Ukraine: 1) civilization will be destroyed by nuclear holocaust, or 2) this, too, shall pass.
In case of the former, deciding what to do is moot. In case of the latter, it’s a pretty safe bet that society will continue on, though perhaps in a new cold war environment that would favor defense industry stocks for a considerable time.
So, let’s assume that the Ukraine crisis passes, leaving behind a reasonably familiar normal world.
For the near future, there will surely be disruptions. If conflict results in fairly long-term economic war, the supply chain disruptions we have today will be greatly aggravated. Remember, Russia is the source of a large number of raw materials used by American industry, as well as gas and oil for Europe and wheat exported to numerous countries.
Of course, such disruptions will drive up costs to be passed along throughout production and transportation further aggravating inflation.
But all of those risks and worries aside, the underlying U.S. economy appears to be strong, and people are increasingly in a mood to let loose and spend on entertainment. And that means spending on casino entertainment, whether on the gaming floor or in restaurants and showrooms.
Almost all the recent data points to such free spending, and that data includes gaming revenues.
From our perspective, the best places to invest continue to be in the domestic casino industry.
Gaming technology and equipment manufacturers are likely to benefit from growing casino spending, including companies like Everi whose Fin Tech services ride the wave of higher gaming revenues.
Likewise, technological change is an incentive for casinos to buy new games and systems.
However, the manufacturers will still have supply chain issues to navigate.
There is growing confidence that Macau casino operators can look forward to a prosperous future as new gaming concession rules are likely to avoid draconian restrictions and Covid is going away.
However, optimism should be tempered with the understanding that the Chinese Communist Party is anti-gaming, and over time will limit the industry. The days are over of looking at the vast Mainland China population and extrapolating from that nearly endless growth.
