UPDATED FRIDAY
FEBRUARY 3, 2012
THIS
PAST WEEK WAS AN OKAY WEEK AS FIVE OF THE NINE STOCKS WE FOLLOW ROSE ON THE WEEK, BUT SEVEN OUT OF THE NINE
STOCKS WE FOLLOW ARE STILL SHOWING A LOSS FOR THE PAST 52-WEEKS.
On
the "Stock Market Notes" page I have a report about how Wall Street is having a nice gain to start off the year helped by
lower unemployment and more jobs. More jobs can mean more business for the Vegas and casino gaming stocks that we follow.
But it will still take some time for more wealth on Main Street America to reach Las Vegas Boulevard and our gaming companies.
The Dow Industrials were up more than 600 points during the first five
weeks of 2012, and that's a good sign for those who follow the so-called January Indicator or January Predictor or the January
Effect. This past week the Dow was up about 202 points with most of the gain coming on Friday following the report about
more jobs being created and a slight drop in the unemployment rate.
This past week
was a good one for the gaming stocks we follow. It wasn't a great week, and actually it was just an okay week.
Five of the nine were higher on the week, three were lower on the week, and one was unchanged.
One of the big developments this past week was that Caesars Entertainment announced that it had plans for an IPO
and public stock issue. You can read more about the press release that Caesars put out, and some of my comments
about it by clicking here. A successful IPO for Caesars could help all of the casino and gaming stocks.
The
real problem, however, comes when you look at our list of 9 gaming, casino and Vegas stocks, because seven out of the
nine are showing losses for the previous 52 weeks. This means, quite bluntly, that had you invested in this list of
stocks one year ago you'd be taking a bath in all but two of them. And that wouldn't be a spa bath I'm talking
about -- it would be a dirty bath in cold, blood chilling red ink.
Most of our gaming
stocks were losers for 2011 and now nearly all are losers for 2012. Luckily we're only five weeks into 2012.
But the point should be taken. And for the year 2011 the Dow was up 5.5% and that was better than the 7 of the
9 casino and gaming and Las Vegas stocks that we follow that were lower on the year 2011. Frankly, had you put your
money into the "Main Street" stocks that make up the Dow Industrials you would have been better off than putting
your money into the "Las Vegas Boulevard" stocks that make up the big gaming issues that we follow.
Here's the bad news for the casino and gaming stocks for 2011. Of the 9 casino stocks that we
watch here every week, only two showed a percentage gain for the previous 52 weeks that made up 2011. In summary,
the overall stock market did much better than the casino and gaming sector did in 2011.
This past week was "okay" for our casino stocks with five of the nine showing
gains and three lower and one unchanged on the week. But for the most part, the Vegas and gaming stocks we
follow were just flat.
Shares of WYNN were the biggest losers
on the week, down $5.10 on the week to $114.89 on news that during the fourth quarter of 2011 the company had disappointing
revenue. WYNN had finished 2011 with a 52-week percentage gain but it is now down 4-percent from
where it was 52 weeks ago. In other words, you didn't do much with your shares in the this company over the last year
-- and you actually lost money.
Shares of Las Vegas Sands rose
by $2.23 this past week on top of $3.22 a share the week before/ Shares of LVS are now up 3%
from a year earlier closing at $51.91. On the positive side, four weeks earlier the shares were down 11% over
the previous 52-weeks.
I can't emphasize this enough: nearly all of our casino and
gaming stocks are lower than what they were a year ago. To put it bluntly, had you bought our list of gaming stocks
a year ago, you'd pretty much be wishing you had stayed out of this Wall Street Casino.
The only stocks showing a gain for the previous 52-weeks are MPEL and LVS. MPELis
not even an American gaming issue -- it's the Macau gaming company. MPEL is showing a gain of 61-percent
and that's up from the 53% gain it was showing five weeks ago. LVS is now up 3-percent over
the previous 52 weeks. A week earlier it was showing a percentage gain of 6-percent over the previous year.
WMS the slot machine maker had some nice gains in previous weeks but this
week it lost 97-cents a share and closed at $23.03 and this stock is now down 45% from a year earlier.
There is still no good news, or rally, for Las Vegas Railway Express
and XTRN is its symbol. XTRN was unchanged on the week at only 10-cents.
And that puts it down 18% from where it was 52 weeks earlier. IGT was down 50-cents on
the week to $15.59 a share and it is now down 11% from a year earlier.
One stock
that recently dropped off our list of stocks showing a percentage gain for the past 52 weeks is MGM
which is now down 5-percent. XTRN is now showing a year over year loss of 18-percent and last
year this stock was showing big percentage gains. The stock that consistently has been showing a percentage
gain is MPEL which is up 61-percent now which is an improvement from a week earlier.
WYNN had a
nice run in recent weeks but it lost steam over worries about the economy in China losing steam and the effects that will
have on gaming in Macau. There have been more reports about strong gaming in Macau but at the same time there are strong
warnings about economic troubles there. The fourth quarter of 2011 had disappointing revenue numbers.
LVS rose $2.23 a share on the week. LVS
is still hurting from worries about Asia as well as worries about its domestic casinos.
MPEL was hit very hard a few weeks
ago after a broker downgraded the stock. MGM gained $1.27 this past week and closed at $14.42 a share. It is
down 5% on the year.
IGT
had some gains in previous weeks and this past week it lost 50-cents and closed on Friday at $15.59 a share.
If you bought the stock a year earlier you'd now be showing a loss of 11-percent.
To keep the gaming sector strong the economy has to be
saved. While there are stories that gaming increases during hard times it is doubtful that in today's economy with high
unemployment, falling real estate prices, and consumer uncertainty that many gamblers will make the trek to Las Vegas Boulevard
to gamble when they can get in their cars and make the relatively short drive to their local casino or Indian gaming establishment.
And now that gasoline pump prices in California are below $4 a gallon again, there is some optimism about road travel
to Vegas will be picking up. But gas is still expensive at $3.50 to $3.95 a gallon and those nearby card clubs
and Indian casinos are looking more attractive to California residents as a result of prices staying stubbornly high.
California is the largest market for Vegas casinos.
Of course people will get to Vegas when there is a big event such as a fight
of a lifetimeor a big building implosion. So maybe leveling the Harmon in CityCenter will help boost traffic at
least for a weekend. And that big event appears to be getting closer.
The big question is if the world's banks and governments can
resolve the current financial worry and get the markets back to a firm footing, and if the unemployment rate can get cut quickly
with job creation -- and not just from workers leaving the labor market which is probably behind the slight drop in unemployment
during November.
Among the other stocks we
watch here: BYD was up 61-cents on the week; it closed at $9.55 a share.
ISLE was hit very hard in previous weeks and this week it gained 21-cents to close at
$5.35 share, which was a solid weekly percentage gain. WMS was clobbered in previous weeks on worries that casinos won't be buying
many new slot machines. The games maker this past week lost 97-cents and closed at $23.03 a share. The volatile penny stock XTRN closed at 10.-cents
a share this week which was unchanged from the week before. Shares of The Las Vegas Railway Express are
now down 18-percent from a year earlier. There was some news about XTRN, the Las
Vegas Railway Express in recent weeks and we expect that more news is coming because this coming summer
its train service between Southern California and Las Vegas is supposed to be running. However, with each passing
week that there isn't news we have to wonder if the train will be running this summer?
Four weeks ago, the chairman of the train company
Michael Barron sent me a text message responding to a post on YouTube.com about gambling on its trains. Barron in the
text said the company had scrapped all plans to offer gaming on its trains. A few months ago it was announced that
it hired a new Chairman of the Board who has been in the railroad industry for decades.
Eight of the nine stocks we followed here had a double-digit percentage
gain in 2010, and every one of those gains beat the Dow 30, and seven of the eight winners had percentage gains that also
beat the S&P 500 (13% gain) and the NASDAQ (17%) gain for the year 2010.
Here is how our stocks did for the year 2010:
LVS up 208%,
WYNN up 78%, BYD up 27%, MGM up 63%,IGT down 6%, MPEL
up 89%, ISLE up 37%, WMS up 13%, and XTRN was up 67% on the year.
Now compare that to how the
stocks did for the year 2011:
LVS down 4%, WYNN up 9%, BYD down 29%,
MGM down 30%,IGT down 2%, MPEL up 53%, ISLE down 55%, WMS
down 54% and XTRN was down 50% on the year.
That's quite a reversal during 2011.
More About Las Vegas Railway Express
Las Vegas Railway
Express is turning out to be a very volatile stock. A few months ago the stock XTRN was
as high as 45-cents a share.
We learned that Las Vegas Railway Express has a deal with the Plaza Hotel and
Casino in downtown Las Vegas to use the old train station and existing rail tracks that go to the Plaza. This was confirmed
by both XTRN and the Plaza management. The train station at the Plaza hasn't been used in years, but
the rails still exist. An official of the Plaza also told me that they are looking into building a new rail system into
the Plaza for high speed trains. The Plaza official also told me that it will be involved with marketing and selling
train tickets for travel. The Plaza reopened on August 24, 2011.
XTRN is now planning to offer
rail service between Southern California and Las Vegas probably this coming summer of 2012.
For
weeks we wondered about a train station for the X Train to use, and now we know what that part of the
plan is. And we understand management is confident this new time schedule will stand for service to start in mid-2012.
Las Vegas Railway
Express, XTRN, is but one of the companies that wants to offer passenger train service between Southern
California and Vegas. Other projects include a proposed high speed rail line that is multi-millions of dollars
and several years away, plus another line to operate on existing tracks known as the "Z Train." A report on
the X Train and the Z Train is on our website on our "Travel / Vacation" page.
There
is not much public information about the "Z Train" either, but we have learned that the Z Train project is now being
called the Pullman Company and see our report on the "Travel / Vacation" page.
A couple
of months ago X Train stock was as high as 45-cents a share, so it is down about 75-percent from that
recent high. For the year the stock is now down 29-percent -- but about nine
months ago the stock was showing a year to date gain of 1,600 percent. This is quite a "reversal of fortune"
to steal a phrase.
Of course there is also a
lot of discussion and speculation about a high speed rail line in California that will be partially funded by State and Federal
taxpayer money -- but it should be pointed out that that high speed rail line is not planned to go to Vegas. There is
another group with plans for a high speed rail line to Vegas called DesertXpress but that is not part of the high speed
line project that has federal funding. And we have to wonder what a downgrade of U. S. debt and rising interest rates
could do to any fund-raising and investment for projects such as these.
About the Vegas Economy
One thing is certain: Las
Vegas can't be healthy if the American economy isn't healthy. There are doubts about the lingering sluggishness in the
economy and that is not allowing Las Vegas and other gambling meccas to recover. And there are more worries about a
double dip recession despite the talk about a recovery. Vegas can't get more revenue when the rest of the country
is pinching pennies and worried about jobs.
A year ago I said it was possible that the "easy money" to
be made in the casino stocks might be behind us. Now, I'm sure of it. The easy money making time is over.
In fact, with most of the stocks now showing losses from a year ago, you might wonder if there is any upside potential left
for these issues?
While a
few of these stocks are still showing modest gains from a year ago it will take a lot more to get these stocks
back to their record highs that were set before the recession. And with the selling of the past few weeks it might be
hard to convince investors that these stocks are good bets. Vegas and gaming have a long way to go before full recovery
and it will depend on the overall economy.
Best wishes, Alan Mendelson