Thanks for all the feedback regarding our Las Vegas Sands (LVS) suggestion. So far, pretty much everyone has agreed with the optimistic assessment. However, in an effort to be fair and balanced, we want to put the dissenting opinions on the table too; all intelligent discussions bear fruit of some sort.

One of our readers wrote back…

Thank you for your email, but I must say I disagree with your call for LVS.

With the latest round of US immigration restrictions, it increasingly becomes more difficult for foreigners (Asians in particular) to travel to the US.  This, in addition to the opening of Casinos in Macao, will, unfortunately, further empty the beautiful Sin City.  While I understand that LVS has substantial exposure to Macao (China), one can’t ignore that LAS is its home turf.  The recent recession in the US has further demonstrated that LAS is feeling the recession, and will continue to do so for the next 2 years, if it is to depend solely on the national consumer …checkmate.

While I will still be checking into LAS for the next 2 yrs for leisure purposes, I am checking out of any invesments in the Sin city for a while…

Thanks for the response; many good points there.

Basically, we think everything you said was true except the big one you closed with…”The recent recession in the US has further demonstrated that LAS is feeling the recession, and will continue to do so for the next 2 years”.

That’s the ultimate argument behind our bullishness on LVS…the recession won’t last two more years.

Yes, Vegas has felt a lull…in revenue and earnings. The June numbers (foot traffic and house take) were both down. However, that history in no way reflects what’s likely to be in store for the next two years. We think the recession will be over within two years, one way or another, if it’s not over already. So, we aren’t willing to make the same assumption you are about two more years of weakness for casino stocks.

The reason we don’t make that blind jump? History. If you take a look at the long-term chart of casino stocks, you’ll see they started to recover well before whatever the crisis was at the time came to a close. These stocks are four for four when it comes to rebounding right when things look the worst.

Logical? No, but when’s the market been logical? We’ve seen time and time again how stocks are priced at what people think they’re going to be worth six to twelve months from now. True valuations rarely play a role in ‘buying low and selling high’.

In other words, we’re not waiting for all the planets to line up perfectly…they just need to appear to be headed in that direction. It’s not a sure thing, but waiting for the perfect time to jump in will probably get you in too late.

Are we right? Who knows? Only time will tell; that’s the ‘risk’ side of the risk/reward ratio. In our view, the reward outweighs the risk here.

Another part of the issue has been difficulty getting into the United States (and therefore Vegas) because of immigration restrictions. The bigger part of it, however, we think has to do with expenses…the hotels are ‘cheaper’ to foreigners when the dollar is weak, but air travel costs more than offset that. With oil down big-time lately, getting to Vegas will be easier to justify…for those who can cross the border.

Any other thoughts on Las Vegas Sands, pro or con? Leave ‘em below.

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