I can't help myself. I just can't.
Anyone who follows gaming stocks knows that over the past few months, the sector has been crushed. Absolutely crushed. While the indexes continue to rise, LVS is in the $50's (down from a high of $88). MPEL is $24 after hitting $45 earlier in the year. The culprit? Largely the Chinese government, which has been cracking down on corruption which, in turn, has purportedly chased the VIP segment of the Macau market into hiding. As a result, after years of year-over-year growth, revenue in the world's biggest gaming market is on the decline. Add to this the fact that Japanese parliament is apparently punting on its casino bill this session, and gaming stocks have taken the biggest hit since the perfect storm in 2008.
But, for how long?
Sheldon Adelson views Macau's issues as simply cyclical. And if there is one thing I believe, it's not to doubt "Uncle Shelly." Say what you want about the man (and, I'm sure poker players have some choice words given Adelson's stance on on-line poker), but the guy is a visionary. While Steve Wynn may build the worlds most beautiful casinos, it is Adelson's vision that is transforming Cotai into the world's greatest gambling mecca. If Adelson continues to build, I will continue to invest (it's worth noting the opportunities that Adelson has passed on -- Manila . . . Spain . . . additional domestic casinos . . . In short, when Adelson moves into a market, his plan is to transform, not simply build a casino for the sake of building a casino).
As for Macau, the government's efforts are having the effect of transitioning the market from VIP to mass gaming which, over the long haul, may actually lead to larger growth, particularly as the Chinese middle class continues to prosper. Infrastructure in the region continues to improve, most notably with a soon-to-be opened bridge from the mainland to the Cotai Peninsula. And capacity continues to ramp up with all of the major players (LVS, MPEL, WYNN and MGM) opening new projects in the next several years (despite the numerous existing concessions, LVS continues to gain market share, particularly in the mass market). Add to this the development of non-gaming attractions currently underway nearby, aimed at bringing family entertainment to the region, and Macau's possibilities seem limitless. Macau may soon be more than just a mecca for gambling; it is shooting to be a world-wide tourist destination.
It seems to me, at this very moment, that LVS is the perfect combination of growth and value. Is gambling going anywhere? Is the Communist government in China going to tank the Macau economy? I'm betting the answer to these questions is "no." In the meantime, the company continues to give back to shareholders with regular dividend increases and an ongoing stock buy-back program. So, while LVS continues to be the proverbial "falling knife," I continue to buy. Hell, in 2015, at current PPS, the yield alone will be north of 4%.
You often hear the philosophy that diversification is the key to investing. I call bullshit on that. I certainly believe in mutual funds. Indeed, they hold the majority of my investments. However, I also believe that when you have a winning idea, you pound it into the ground. Since 2008, the gaming sector has been my winning idea. And now, as 2015 nears, I still believe that to be the case. Short term - who knows. It's been painful. Days like today, I look at how disproportionately my portfolio leans towards gaming (the only individual stocks I own are LVS, MGM and MPEL) and I watch the market open, and feel nauseated. But, you know . . . "blood on the streets" and all . . . I'm willing to gamble on the thesis long term. Gamble BIG. In 2020, I'm either going to be crying over my foolishness, or rolling in funds. But, as we all know, unless you're Tony Bigcharles, you can't beat the casino. So I'm betting on the casino. Time will tell if the bet is a winner.