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Why
Invest in Vegas? Sinnin' Knows No Recession |
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Remember
the investment idea we didn't take last week? Well, we like the timing
a whole lot better now. The details and rationale are below.
We've also got
an update on Spicy Pickle - more progress (which has become the
norm).
And finally,
we've got a bit of a warning for you, particularly if you've
been tip-toeing into financial stocks of late. Much of the bullish
tide you've seen from the sector recently was mostly a lack of a bearish
tide. And, that boost for these stocks is going to be negated today.
We're not predicting the end of civilization, but it's something you definitely
need to be aware of.
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Because
Sinnin' Knows No Recession... |
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In
Friday's newsletter we discussed - in great detail - all the
reasons you may not want to take a new trade simply because you felt like
it at the time. A great company can make for a great stock, but
timing the entry (and the exit) really is half the battle. We felt
this company was well-positioned for future growth, and now we think the
stock is on more reliable footing.
 The
company is....Las
Vegas Sands Corporation (NYSE: LVS). Wait a minute. Isn't
this site a micro cap site, and isn't Las Vegas Sands a large
cap?
Yes, and yes. However, an opportunity is an opportunity. We're not going
to be so stubborn we pass over an interesting opportunity just because
of the company's size.
The next question
is, aren't casinos struggling right now? Yes...and no. The
latest round of numbers suggest these companies are indeed going through
a slow patch. In fact, Las Vegas Sands lost money according to Monday's
quarterly filing. (That was largely the reason we wanted to hold off on
presenting the idea to you.)
Bad news,
right? The stock gained 3.8% on that 'bad' news, so it couldn't have
been that bad. For that matter, the stock is up 66.9% since July
15th. For the industry to be in as much trouble as some people think it
is, there sure are plenty of buyers.
So what gives?
The theory is
basically right ...a tight economy means less discretionary spending, and
high oil prices means it's not as cheap to fly to Vegas as it used to be.
And, the gambling capitol of the world even said it - June's traffic
and house 'take' was down.
The flaw in
the theory is the assumption that Vegas' completely shuts down in a recession.
It doesn't. Trust us - all those lights are still twinkling, and all
those slot machines are still clinking. The rumors of Vegas' death have
been greatly exaggerated, as has the selling spree.
The other issue
- higher gas and jet fuel prices - has largely been relieved with
oil's move from $146 per barrel to $112. Even a modest price increase isn't
likely to deter renewed willingness to travel by air.
The bottom line
is simple... Vegas goes through cycles just like everything else does.
The
cornerstone casinos have survived every one of them. For investors
who had the willingness to step in when things looked their absolute worst
- like 1987, 1991, and 2001 - the rewards were tremendous. We think
this time around could be just as fruitful. (Click
here for a longer-term chart of the major casino stocks.)
 As
for Las Vegas Sands, we saw high-volume buying on Tuesday after they announced
their numbers. Up 66% in less than a month, and when they lost money?
The future clearly has to look better than the past. That's not the real
attraction though.
No, the real
attraction
is how LVS shares are still trading at less than half their value from
October. If the end of the weakness really is near (or perhaps even behind
us), that's plenty of room for recovery. The last four and half weeks certainly
look like there could be one in the works.
As for the timing,
yes, some of it has to do with waiting to hear their results. However,
we also wanted to see how the stock shaped up over the last few days. With
the move past a key resistance line (and on rising volume no less),
the upswing appears to have a little more momentum than it did then.
We'll check
in on Las Vegas Sands on a regular basis, for those of you who are inclined
to pull the trigger.
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Add
Another One to the Spicy Pickle Total |
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Congrats New
York! Your first Spicy
Pickle (OTCBB: SPKL) is almost here. The store in Brooklyn Heights
is planning to open its doors sometime in August. Unless another store
opens up between now and then, this will be the company's 43rd restaurant.
We've mentioned
it before, but we'll repeat it now - the first store in a new area is the
toughest one to get rolling. Once established though, it acts as a seed
for more units in the nearby area. And, clearly New York offers enormous
revenue potential.
It'll be interesting
to see how this market takes shape.
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SEC
Lifts Ban on Naked Short Selling of Nineteen Stocks |
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You've probably
heard about it, but you may not know all the details...like the official
end date.
 What
we're talking about is the Securities & Exchange Commission's temporary
ban on naked short selling of nineteen major financial stocks. The
rule was put into place shortly after the Fannie/Freddie debacle. The goal
was simply to prevent a complete implosion of the financial sector's core
stocks.
The ban ended
last night at 11:59 PM EST. As of today, naked short selling of those
nineteen financial stocks is now permitted.
The implication
for the average investor is just that these equities may be subject to
severe selling pressure again. It might not (and probably won't)
happen at all. We just want to give you a heads-up in case the market decides
the first bout of selling wasn't enough; the SEC won't step in early enough
to do anything about it.
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Updated: 3:10 pm PST (23:10 GMT), November 20, 2008
