FR: Is MGM All-in on CityCenter?

Article: Is MGM All-in on CityCenter?

Up next in my “Fool Revisited” series was another sector piece, this time about the gaming industry. When I started the Writer Development Program, I thought that I would eventually focus on gaming stocks, but I never got around to it, primarily because there was another Fool that already had cornered the market on all things gaming.

As you can see from the title of the article, it was influenced by MGM Resorts International (NYSE: MGM) investing a lot of money on a development called CityCenter, a $9.2 billion investment that included a new hotel, condominiums, shopping, and all sorts of other crap. This was a trend in Vegas over the past decade or so, with luxury casino/hotel owners trying to complete with big money developments outside of the US. Despite some early struggles, CityCenter is a thing that exists, and people are obviously buying condos or shopping in its stores.

No tweet for this one either, if only because I started writing a little more frequently and wasn’t necessarily going back to tweet out all my articles individually.

Had an investor purchased and held onto MGM Resorts after the publication of my article – which was a generally positive – they would have been one happy investor. The compound annual growth rate (CAGR) and total growth of MGM beat the S&P 500 pretty handily from article publication (September 16, 2011) through January 12, 2018:

Stock Start Price End Price CAGR Total Growth Value of $10,000
MGM Resorts $10.64 $35.03 20.72% 229.23% $32,923
S&P 500 $1,216.01 $2,786.24 14.00% 129.13% $22,913

Source: Yahoo! Finance & author calculation; Stock prices include dividends & stock splits

Gaming stocks are often avoided as “sin stocks,” but even discounting that factor, gaming companies are often deep in debt and very dependent on a solid economy. The average person will probably (hopefully?) only gamble when they feel like they have a little extra money, so a good economy is paramount for a lot of people to partake. Las Vegas is also very dependent on discretionary funds and the foot traffic generated by visitors, so even if the average person is not going to be buying a condo at CityCenter, they might stop by to see the fancy slot machines and see if they can find a low limit blackjack table. Nevertheless, I don’t think I could see myself investing in gaming stocks these days, but only because I feel like there might be an economic downturn around the corner.

Until next time…

Disclaimer: I do not own currently own shares in MGM Resorts. I also have no plans to purchase shares within the next 60 days in any account in which I manage investment funds. You can read a little about my personal investment philosophy here.

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