It’s game on for the gaming industry and casino stocks, as the nascent economic recovery is giving more and more consumers enough confidence to get back to one of the world’s most popular pastimes — gambling. And while the number of consumers willing to go “all in” on big trips to gaming Meccas like Las Vegas and Macau still is far less than it was during the boom years before the Great Recession, the industry and its biggest companies are starting to make a solid rebound.
That rebound has certainly been reflected in the sector’s exchange-traded fund (ETF), the Market Vectors Gaming ETF (NYSE: BJK). This ETF has had a great year, up over 40% during the last 12 months. BJK tracks an index of 50 global public gaming companies primarily engaged in casinos and resorts, equipment and technology, sports and race wagering, online gaming and horse racing.
Yet despite the strong move in gaming stocks over the past year, BJK trades at just $32.54 (as of Feb. 16), and that’s still way off its January 2008 high of $45. So, does this means there are more winnings out there on the table for gaming stock investors?
If we look at some of the BJK’s biggest components, we see that several gaming industry stalwarts have recently reported earnings, and the results were mixed.
Las Vegas Sands Corp. (NYSE: LVS) reported better-than-expected profits in the fourth quarter; however the company’s revenue from the all-important Macau casinos missed expectations. LVS shares slid on immediately following the news, but since the post-earnings slide the stock has trended higher.
Wynn Resorts Ltd. (NASDAQ: WYNN) also has a big Macau presence, but unlike LVS, Wynn hit the jackpot. Shares surged after the company rebounded from a 2009 fourth-quarter loss of $5.2 million to a 2010 fourth-quarter profit of $114.2 million. Booming revenues from the company’s Macau operations helped Wynn turn a winning hand.
MGM Resorts International (NYSE: MGM) was the last of the major casino operators to report fourth-quarter results. The company, which gets about 70% of its revenue from Las Vegas, reported a narrower fourth-quarter loss of $139.2 million, which is much better than the $433.9 million the company lost in the same quarter a year ago. However, shares slid on the news as analysts were expecting better results.
What the mixed results from these gaming giants suggest is that when it comes to betting on the sector, investors have to pick their horses carefully. For my money, Wynn Resorts certainly deserves more attention than either Las Vegas Sands or MGM. Of course, if you want to bet on the sector at large, then you can’t go wrong with the Market Vectors Gaming ETF.
As of this writing, Jim Woods did not own a position in any of the stocks named here.
