Last month, I wrote this article for StreetAuthority.com on casino and gambling stocks. Any way you cut it, gambling stocks are still under pressure. But I picked one B&M and one online company I thought had the edge. Both companies made the news last week, making me look smart.
Wynn Resorts received approval from Hong Kong regulators last week to launch an IPO, listing a percentage of its Macau assets on the Hong Kong stock exchange. According to sources, Wynn will raise $1 billion from the IPO for 20% of the company’s Wynn Macau Ltd.
The Hong Kong stock exchange has been very hot lately as at least some portion of the Chinese government’s stimulus money has made its way into the market. The government doesn’t particularly like this and has talked about cracking down on speculation — and even gave an irrational exuberance speech.
But so far, the market continues to run. And this bodes well for Wynn’s IPO, scheduled to launch in early October. Since I wrote the article on August 8th, Wynn has outpaced the S&P 500 by more than 2-to-1, gaining a smidge over 10%. Of course Wynn is a lot more volatile than the broader market and is susceptible to pullback when if there is a market correction.
My other pick was 888 Holdings, home of Pacific Poker. Last week, 888 Holdings was selected to provide online gaming services for Harrah’s Entertainment. The stock is up 20% since I mentioned it. I’d like to claim that this was sheer genius on my part and that somehow I figured out that 888 would be Harrah’s pick. But in reality, PartyGaming would have been a more logical choice.
Party, after all, had sponsored the WSOP prior to the passage of the UIGEA. Harrah’s had also hired on Party’s former CEO Mitch Garber to head up its new online division. Party had also folded under pressure settled with the DOJ, cleaning its slate prior to the potential legalization/regulation of online gaming in the U.S. It also cleared the way for a regulated B&M casino to associate with Party. So why not Party?
Everyone knows that there was no love lost between Harrah’s and the World Poker Tour. Did Party’s acquisition of the WPT last month kill its prospects with Harrah’s? While that seems like intuitively appealing logic, it would only have given Harrah’s and 888 a couple of weeks to cut a deal. That seems a little quick.
At work on Friday, I explained “poker logic” to the marketing team. If you’re having a good run in poker, it’s because you’re smarter than everyone else. If you’re losing, bad luck is obviously to blame. I further explained that if subscriptions rose for my newsletter, it was because I was a smart investor. If they lagged, it was because marketing wasn’t doing its job:) They laughed and rolled their eyes appropriately.
Luck cuts both ways. I confess, the dragon of fortune was good to me last week.
Pictures of Wynn Macau were snagged off their website.
P.S. I thought of Susan Miszkowicz on Friday and cried at my desk a little. Guess I’ll keep doing that every year.