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Las Vegas Sands: The Tables Have Turned

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

By Nathan Slaughter

NEW YORK ( StreetAuthority) -- I'm a big fan of Las Vegas. I try to visit at least once a year to try my luck at the tables (I leave the club-hopping to the socialites).

I'm also an advocate of gaming stocks. In fact, I spent over a year writing a regular monthly feature for Casino Player Magazine called the "The Gaming Investor." That column enabled me to follow every bend and twist in this fascinating industry. This was back in 2007, when casino resort owners, slot vendors and racetrack operators were filled with promise.

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Unfortunately, the gaming sector was obliterated by the recession of 2008 and 2009. After years of stellar earnings and scorching stock gains, investors fled when consumer spending went cold and business conventions stayed closer to home.

Las Vegas is a poster child for the excesses of the real estate bubble. Land that was bid up to astronomical levels now sits vacant, strewn with half-finished projects that were abandoned when funding dried up. Overcapacity from the construction boom has made life difficult, even for experienced operators.

The Sands Macau

Just look at Las Vegas Sands (LVS), which owns the glitzy Venetian and Palazzo mega-resorts and is also the world's largest casino operator by market volume. The shares ran up to the exorbitant price of $148 in October 2007 amid unbridled optimism. But they plummeted 99% over the next 18 months. By March 2009, you could pick up shares for about the price of a cup of coffee -- $1.38 per share.

Clearly, the market overcorrected to the downside. The stock has since clawed its way back to $57. Bargain hunters who invested just $1,380 to scoop up 1,000 shares at the bottom are now sitting on a cool $57,000.

One of the quickest ways to gauge the health of a resort is revenue per available room, a metric that reflects both occupancy and pricing. If the resort is full (and not marked down just to fill beds), then demand is healthy.

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