Question: Everyone knows gambling is not a good investment, but are gaming companies good stock market investments?
Stephanie in Bridgeport, Ct.
Answer: For the most part, yes.
Companies like MGM Mirage, Mandalay Resorts Group, Caesars Entertainment and Harrah's Entertainment -- the companies that control the bulk of the major casinos in Las Vegas and around the country -- are solid long-term investments. They have their ups and downs just like any other company and are very prone to fluctuations based upon current events.
For instance, after the Sept. 11 terrorist attacks and the resulting travel market decline, a lot of the big gaming companies that had their primary portfolios in Las Vegas saw steep declines in their valuations.
But this past year has been a very good one for gaming companies. MGM Miarage was at around $25 per share a year ago and, as of this writing, is trading at around $44 per share. Mandalay Resorts Group was around $28 and now is trading over $50. The other companies have seen similar gains along with the general upward trend of the stock market.
But the biggest winner so far has to be Steve Wynn's company. Wynn Resorts Limited was trading around $13 last year at this time and today is at around $40 per share -- and this is all without any income or property to speak of. The company doesn't even have a casino yet!
If Wynn Las Vegas opens next year as an out-of-the-box success, you can expect that share price to go through the roof. Of course, if the hotel is viewed as anything less than an instant success, that share price will likely go down quickly. It's all a big gamble.
I guess the stock market has a lot more in common with casinos than you thought.
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