Casino Stocks Under Pressure Following Credit Suisse Downgrade Of Melco Crown, Sands

Casino stocks were trading mostly lower on Monday following a cautious report by analysts at Credit Suisse. Credit Suisse's Kenneth Fong cautioned investors in a research note that while casino operators have seen strong gains in their stock recently, further gains "may take a breather here." The analyst suggested that the casino sector, particularly in Macau, needs to consistently beat expectations to move higher - an event that is unlikely to happen in the near term. With that said, Fong argued that investors need to be "selective" in which casino operators to own. The analyst followed with 4 criteria investors should use to determine which casino operator to own: 1) buy names that are under-owned, 2) buy names that have room for earnings upside, 3) buy names that are trading at an "undemanding" valuation, 4) buy names that have exposure to the high-end demand recovery. Fong continued that based on his criteria, his top picks are Wynn Macau and MGM China. On the other opposite of the trade, Fong downgraded Sands China and Melco Crown Entertainment Ltd (ADR) MPEL Bottom line, Fong's call is based on valuation and a near-term risk is the fact that it is "too early" for the industry to show full signs of recovery and valuation will "overshoot on the upside."