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Atlantic City Casino Data Weigh on Trump

Editor's note: "Bricks and Mortar" is a mock portfolio created by Senior Writer Nicholas Yulico that is meant to help generate real estate and gaming-related stock ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks.

The Atlantic City casino market remains a mess, with gaming revenues falling 10% at the city's casinos in March from a year earlier.

The dismal report, released Thursday, sent shares of Trump Entertainment (TRMP) down 9% to $3.14 in afternoon trading. Trump is a stock I've flagged as overvalued in the Bricks and Mortar portfolio.

Revenue fell 6.3% at Trump Marina, dropped 4.1% at Trump Taj Mahal and fell 2.2% at Trump Plaza. The results, however, weren't as severe as the overall market's 10% decline and the 13.4% revenue drop at the Borgata Hotel Casino, which is jointly owned by MGM Mirage (MGM - Get Report) and Boyd Gaming (BYD - Get Report) and is considered the best property in the market.

For the past year, Atlantic City has been under intense competition to attract gambling players with nearby Pennsylvania, which legalized slots parlors. The implementation of a partial smoking ban in New Jersey is also hurting the market.

I continue to recommend investors should avoid buying Trump shares, as the lack of near-term cash flow growth and hefty debt burdens leave little value for equity holders.

The stock also will continue to remain volatile because of hedge fund trading in the name. According to Goldman Sachs research, about 18% of Trump shares are owned by hedge funds -- the fourth largest percentage among casino stocks. The stock also has a short interest amounting to 26% of the float.

Progressive Gaming (PGIC), Multimedia Games (MGAM) and Bally Technologies (BYI - Get Report) have the most hedge fund ownership (at 32%, 31%, 25% respectively, according to Goldman.)

Bricks and Mortar Portfolio
A Look at How Nicholas Yulico's Picks Have Performed
Rating Date Price at Rating Rating Current Price* Total Return** year end 07 price 2008 YTD Return
Brookfield Properties (BPO) 1/23/2007 28.67 Own 19.47 -32.1% 19.25 1.1%
Global Real Estate ETF (RWX) 1/23/2007 64.00 Own 53.72 -16.1% 56.95 -5.7%
Ryland (RYL) 1/23/2007 56.00 Flag 33.49 40.2% 27.41 -22.2%
Trump (TRMP) 1/23/2007 17.50 Flag 3.45 80.3% 4.30 19.8%
Penn National (PENN) 2/6/2007 45.56 Own 42.64 -6.4% 59.55 -28.4%
Melco PBL (MPEL) 3/12/2007 15.46 Own 13.42 -13.2% 11.56 16.1%
Starwood Hotels (HOT) 7/12/2007 72.37 Own 49.35 -31.8% 44.03 12.1%
Home Depot (HD) 1/30/2008 29.71 Own 27.67 -6.9% -6.9%
Pulte Homes 1/31/2008 16.35 Flag 14.01 14.3% 14.3%
Average Total Portfolio Return, Unweighted, (including closed ratings) 16.8% 3.5%
Closed Ratings Rating Date Price at Rating Rating Closing Price*** Return**
Hilton (HLT) 3/2/2007 34.69 Own 47.50 36.9%
Home Solutions of America (HSOA) 4/24/2007 4.98 Flag 1.06 78.7%
Standard Pacific (SPF) 10/26/2007 5.25 Flag 2.20 58.1% 3.35 34.3%
Close At Start of Portfolio Current Value*
S&P 500 1427.99 1,354.49 -5.1% 1468.36 -7.8%
U.S. MSCI REIT Index 1140.36 896.39 -21.4% 870.64 3.0%
*(4/9/08 closing prices)
**For "flagged" stocks, a drop in price is tracked as a positive for the portfolio, and a rise in price is a negative.
***Hilton closed out of portfolio on 10/26/07 because Blackstone Group completed purchase of firm.
HSOA closed out of portfolio on 12/26/07 at day's closing price
SPF closed out of portfolio on 1/11/07 at day's closing price

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