Investing In Casino Stocks Is Like Gambling On Gambling

Las Vegas casino

People in the finance world H-A-T-E it when others compare investing to gambling. In some ways, they have every right to be peeved. Playing poker or blackjack requires skill, but also relies heavily on luck in terms of which cards are drawn. Your rewards are more or less determined by chance.

The stock market has over a century’s worth of data to support possible future trends, gains, and losses. While no one can predict the future, there are a million charts, graphs, and patterns to look at that support one’s decision to invest in a certain stock. This data doesn’t always work out in an investor’s favor or guarantee returns, but it’s better than a crap shoot.

Occasionally, the gambling world and the financial world intersect. This usually happens when a casino or gambling-related company goes public. This results in a company that makes money off gamblers selling their stock to people speculating on that company’s future. So, not gambling, but really close.

Best of all, you can try your luck at these casino companies. After all, they’re raking in millions, if not billions each year and don’t seem to be slowing down. At the same time, gambling on gambling could make for a risky bet. Should you take the plunge? Let’s take a look.

There are dozens of publicly traded casino stocks, including many popular Las Vegas locations.

Wynn Resorts ($WYNN) owns upscale casinos and resorts (including the Wynn). Wynn’s market cap is over $13 billion and are up 44.71% since the beginning of the year, so they don’t do so bad for themselves.

MGM Resorts International ($MGM) owns the Bellagio, MGM Grand, Mandalay Bay, New York-New York, and Circus Circus, among others. They have a higher market cap than Wynn at $17.32 billion. Their earnings this year are much less impressive, rising only 3.33% since January 3. Nonetheless, they’ve performed fairly well in the last year (+34.37%) and five years (+120.34%).

Las Vegas Sands ($LVS) owns the ever-popular Venetian and The Palazzo, two decadent-as-heck casinos known for opulence and high-rollers. The company’s stock is up 10.95% this year so far, and 26.43% in the last year. The company’s market cap, however, sits at an impressive $47.62 billion, or more than the previously mentioned companies combined.

These aren’t the only casino stocks in Vegas or elsewhere. Caesars ($CZR) owns casinos in Vegas and beyond. Golden Entertainment ($GDEN) owns casinos in Nevada and Maryland.  Melco Crown Entertainment Limited ($MPEL) has numerous casinos and resorts throughout Asia. If there’s a popular casino or resort band, chances are there’s a stock for it.

Slot machines and gambling tech companies are just as popular on the stock market.

International Game Technology ($IGT) makes slot machines and other casino equipment. They also make devices and software to monitor and better monetize said equipment. Though the company has an impressive $4.41 billion market cap and is up 23.13%, they’re down 13.44% since the beginning of the year, showing signs of possible future declines. Other stocks, like Scientific Games Corp ($SGMS), Gaming Partners International Corp. ($GPIC), and Nevada Gold & Casinos ($UWN) sell similar products to the above casinos and other clients.

Should you invest in casino-focused stocks?

All stocks in the casino industry make money from one source and one source only: gamblers. Though slot machine companies get paid from the casinos using them, the casinos themselves make money from their customers. Seeing as there’s a never-ending supply of people willing to bet their money in Vegas, these companies do well for themselves. They just need to worry about drawing in more people, having them spend more money, and creating more locations or opportunities to make money.

If you think this is a sound business model, you might want to think about investing in a high-performing casino stock. If you believe that big-spending patrons of places like Wynn and Caesar’s Palace will help those companies rake in more profits in the future, this might be the sector for you.

Yet if you’re not comfortable with making money on other people losing money, you might want to sit this one out.


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