“If you’re standing in front of the exits, get out of the way,” the late Chick Hearn used to say when the Lakers opened up an insurmountable lead and the fans began to leave the building en masse.
I remembered that quote today as I was witnessing the carnage in the gaming sector. Investors are heading for the exits (not unlike the way they did recently in commodities.)
Wynn Resorts (WYNN) is down nearly 10%, Las Vegas Sands (LVS) is off nearly 11%, and Boyd Gaming (BYD) recorded a 6.5% decline, and the debacle du jour–MGM Mirage (MGM)–got clobbered to the tune of 21.8% (see also, “
Talk about stock market capitulation! Doesn’t anyone want to have some fun anymore? Apparently not. Those who do, are gambling less, preferring to spend time lounging at the pool, relaxing at the spa or simply watching a show–all of which contribute little to casino revenue (see also, “The Las Vegas Sands (LVS) of Time.”
Trips to Vegas from California are no longer the cheap, easy jaunts of the past. It takes big bucks now just to travel to Sin City. Airlines are hiking fares and cutting capacity, which has lowered room rates along with occupancy levels.
Know When to Fold ‘Em
In addition to today’s losses, all the companies mentioned above trade at or near their 52-week lows and MGM and LVS have lost close to 75% of their value while BYD has lost more than 80% (so much for anticipating the opening of that new multibillion-dollar Echelon property!).
WYNN is the best performer of the group, having lost just 60% of its value in the past year. I’m sure WYNN will shoot up, but I would use that as an opportunity to sell. Remember, the stock market is a forward-looking mechanism. Q2 might look okay for WYNN, but in the longer-term nothing that I can see has changed.
And last I checked, the Chinese stock market was down 50% this year. At what point does demand begin to wane for the Chinese high-roller, Macau?
WYNN may be on a hot streak right now, but what about tomorrow? Don’t be fooled by Macau’s winning streak or an anticipated stock buyback.
It would be tempting to become a contrarian here, but as Chick Hearn said, it may be best to just get the hell out of the way. Use the forthcoming pop to sell your gaming shares. Don’t get suckered in by what should be a short rally.
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