This column originally posted on RealMoney.com at 10:04 a.m. EDT. For more information about subscribing to RealMoney, please click here.Investors in casino stocks have gotten severely burned over the past year, as earnings multiples have fallen from historic highs and the economic downturn has ravaged profits. After the whopping declines in the sector, it's worth sorting through the carnage to see if there are any good buys out there. The Bricks and Mortar mock portfolio already includes two casino stocks I feel are worth owning -- Melco PBL ( MPEL) and Penn National ( PENN), both of which, admittedly, have been disasters. Nonetheless, I am a sucker for the casino sector. In the long run, the cash flows of casino owners remain somewhat steady, while also offering the potential for growth. At depressed multiples today, some steals exist, especially considering the asset value of irreplaceable casinos. Today, I'm adding Boyd Gaming ( BYD) to the mock portfolio as a stock to own. Shares of the casino owner have fallen more than 70% in the past year to around $13 today, as Las Vegas casino results have weakened and investors remain nervous about the returns on Boyd's massive Echelon Place, a development slated to open on the Vegas Strip in late 2010. Buying beaten-down casino stocks can be a risky trade today. To hedge the Boyd position, I'm also recommending investors short Perini ( PCR), the construction contractor for the Cosmopolitan Resort and Casino development in Las Vegas. Why? I believe the project has a meaningful risk of being cancelled, which would be a severe blow to revenue. But more on this later.
|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||18.09||-36.9%||19.25||-6.0%|
|Global Real Estate ETF (RWX)||1/23/2007||64.00||Own||47.74||-25.4%||56.95||-16.2%|
|Penn National (PENN)||2/6/2007||45.56||Own||34.00||-25.4%||59.55||-42.9%|
|Melco PBL (MPEL)||3/12/2007||15.46||Own||9.41||-39.1%||11.56||-18.6%|
|Starwood Hotels (HOT)||7/12/2007||72.37||Own||40.84||-43.6%||44.03||-7.2%|
|Home Depot (HD)||1/30/2008||29.71||Own||24.66||-17.0%||-17.0%|
|Average Total Portfolio Return, Unweighted, (including closed ratings)||13.5%||(0.3%)|
|Closed Ratings||Rating Date||Price at Rating||Rating||Closing Price***||Return**|
|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*|
|U.S. MSCI REIT Index||1140.36||828.45||-27.4%||870.64||-4.8%|
|*(6/26/08 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 1/11/08 at day's closing price
TRMP closed out of portfolio on 5/29/08 at day's closing price