How To Win In Las Vegas!
The Dynamic Wealth Report
January 25, 2010
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…
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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.
• Auto Parts Industry (Up 29%)
As the economy improves, the outlook for auto sales is becoming
brighter. Despite two of the big three automakers in the US being owned
by the government, industry sales are looking better. An improving
outlook is driving parts suppliers higher.
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