Casino stocks have taken the brunt of rising oil and food prices, and the credit crunch. Many of them are trading at 52-week lows and the ones I like to follow had a good day Friday. With the summer months heating up, these stocks could be poised for a run higher. They are not out of the woods just yet but I wouldn’t be afraid to buy a few longer-term call options as a way to play the rebound. Here is a list with a few call options to consider:
Las Vegas Sands (LVS, $55.84)
July 60 call (LVSFL, $0.40), September 60 call (LVSIL, $4.30)
MGM Mirage (MGM, $42.12)
July 45 call (MGMGI, $1.60), September 45 call (MGMII, $3.40)
Wynn Resorts (WYNN, $92.19)
July 95 call (UWYFS, $1.20), September 95 call (UWYIS, $8.10)
Also worth a look:
Boyd Gaming (BYD, $16.83) – a buyout candidate
Pinnacle Entertainment (PNK, $12.62)
Trump Entertainment ($2.68)
Melco PBL Entertainment (MPEL $10.44)
Most of these stocks are 40%-50% off their highs and should bounce back over the next 6-12 months. Gaming revenues will need to improve going forward and there was a positive sign as Atlantic City reported a 1.6% increase in revenues for the month of May when compared to the same month a year earlier.
The gambling/ casino business is still a growing industry and new legislation is allowing more and more states to participate. Plus the market abroad has even bigger potential. Given the reduced stock prices and lowered expectations, this is one sector worth keeping an eye on.