How To Win In Las Vegas!
Just this morning, a group of co-workers returned from a weekend trip to Las Vegas. From Phoenix, Vegas is a short 5 hour drive or 50 minute flight. It’s so easy to get to that heading out on a random Friday night isn’t strange.
Given the state of the economy, once you get to Vegas, getting a room isn’t difficult. Right now you’ll get a pretty good rate.
My co-workers went to party it up, catch a show, and of course, gamble. From the laughter and all the pictures, Vegas is the place to be.
It doesn’t matter why you go to Vegas… here’s the truth… most people leave Vegas with their wallets significantly lighter. And the casinos are more than happy to take their share. Nobody makes more money in Vegas than the casinos.
I’ve got to admit, I love their business. Casinos always win in the long run. Always!
The gaming industry is a very profitable business. And shareholders who invest at just the right time can walk away a big winner. That’s what got me thinking…
Is now the time to “double down” on the casinos?
I know one investor who thinks now’s the perfect time. Carl Icahn.
Famed investor, Carl Icahn, recently submitted the winning bid for the Fontainebleau Las Vegas. The Fontainebleau is a real estate development project that slipped into bankruptcy. The project was put up for auction and Icahn scooped it up for just $106 million. He also pledged another $50 million for financing throughout the remainder of the bankruptcy proceedings.
Icahn is taking a big bite of Las Vegas. The estimate cost to finish development… $1.5 billion!
What does Icahn see? Clearly, he sees a return to growth in the gaming business. Here’s a quote from Icahn himself, “There’s no question right now that Las Vegas is overbuilt, but I believe that eventually demand will catch up…”
Clearly, Icahn expects a big recovery in the gaming industry.
Remember, the recession knocked the industry to its knees. But, it won’t stay that way for long. While Vegas might be struggling now, eventually travel and tourism will pick up. And that means more visitors to Vegas… more visitors means more gamblers… more gamblers means more action in the casinos… and that leads to bigger profits for the casinos.
Best of all, bigger casino profits lead to higher stock prices!
If we want to follow Icahn’s lead, where should we invest?
The MGM Mirage (MGM) or Las Vegas Sands (LVS) are always popular picks. However, consider this. I see the entire industry rebounding… and not just Las Vegas. Think of all the other areas where gambling is popular… Atlantic City, Indian casinos, riverboats, Macau.
As travel and tourism activity increases, all of these areas will benefit.
Instead of investing in a single company, why not buy them all? I found an ETF that tracks the gaming industry… it’s called Market Vectors Gaming ETF (BJK).
The beauty of this ETF is its diversification. The ETF holds 57 different gaming and gaming related stocks and it’s globally focused. Not only do you get exposure to companies like LVS and MGM, but also companies in Europe, Australia, and China (just to name a few).
I like the gaming industry and so does Carl Icahn. If you like it too, take a closer look at the Market Vectors Gaming ETF for your own portfolio.
Category: Stocks
