Best Casino Stocks

A controversial sector due to the underlying gambling industry, casino stocks represent a real-time indicator of economic health. Naturally, when people are enjoying the sentiment boost of a bull market, they tend to be more open with their wallets. Subsequently, the VanEck Vectors Gaming ETF (NASDAQ: BJK) generally follows the ebb and flow of the major investment indices.

Following the devastating COVID-19 impact, casino stocks bore the brunt of the damage. But with the sector bouncing back, it also represents the hope of a return to our normal daily routines.

Quick Look at the Best Casino Stocks:

• MGM Resorts
• Wynn Resorts
• Las Vegas Sands
• Caesars Entertainment
• Penn National Gaming

Overview

Historically, the health of the consumer market has a fairly strong direct relationship with casino stocks. Specifically, the University of Michigan’s Consumer Sentiment index shares a 64.9% correlation coefficient with the VanEck Vectors Gaming ETF. In other words, as sentiment rises, demand for casino and gaming activities generally rise as well. The opposite is also true: Demand for gaming slips if the consumer economy weakens.

Interestingly, casino stocks also provide a real-time indication of what people in general might be feeling regarding economic confidence. The Consumer Sentiment index is a lagging indicator, whereas casino stocks “print” their results every trading day on the charts. For example, the BJK ETF began tumbling in 2018 as the U.S.-China trade war heated up but began recovering in the back half of 2019 as relations improved.

Of course, the hammer came down in early 2020 when the SARS-CoV-2 virus began spreading wildly back home. One of the starkest images of the darkest days of the pandemic came out of Las Vegas, a city that never sleeps. Looking completely barren because of nationwide lockdown measures and fears among the populace, “Sin City” looked like a scene from a post-apocalyptic movie set.

Fortunately, the narrative of the pandemic didn’t end there. Instead, unprecedented government action and cooperation with international partners contributed to the development of vaccines in record-breaking time. Now, casino stocks have become emblematic of hope, not despair. While many challenges remain, risk-tolerant investors may want to consider adding gaming-related investments to their portfolios.

Best Online Brokers for Casino Stocks

While parallels between stock market investing and casino gambling exist, particularly in problematic behaviors found on the spectrum’s extreme end, it’s also fair to point out clear distinctions between the two. Primarily, casinos integrate certain advantages to ensure that in the long run, the house always comes out the winner.

Wall Street’s elite hedge funds have massive resource advantages over the little guys of the market, but ultimately, no one really knows for sure where stocks will go. Where public retail investors can tilt the balance in their favor is through education and information.

Therefore, your best online brokers for casino stocks may not just revolve around convenience or personal preference. Instead, you should really look into platforms that provide educational literature on better trading tactics.

Below are the best brokers for casino stocks.

Features to Look for in Casino Stocks

1. Market presence: If you’re in the casino business, you can easily extract profits, assuming you’re running a visible, well-managed enterprise. But as with anything in life, money — or the lure of it — attracts substantial competition. When circumstances cause an industry to lean out as they did during the pandemic, only the best casino stocks survive. Therefore, you should focus your gaming portfolio toward the biggest names in the industry.
2. Financial resilience: Late last year, the Las Vegas Review-Journal wrote an insightful but blunt article about its home market’s efforts to wean itself off casinos. However, such initiatives failed because tourism is such a major draw for Sin City. As a result, this desert paradise faces extreme boom-bust cycles: amazing on the good days, dreadful on the bad. To handle such volatility, consider casino stocks with robust financial stability.
3. Diversification: Another important factor to assess regarding these stocks is diversification. Inevitably, a majority of gaming companies are tied to Las Vegas. However, the COVID-19 pandemic proved that it’s never wise to have all your bets in one basket. Many gambling-related businesses that fared relatively well had exposure to several key markets, not just to Vegas. Moving forward, diversification likely will be a huge determiner for prospective investors.

Rolling the Dice on a Full Recovery

You would be forgiven if you gave up entirely on casino stocks when the COVID-19 crisis rudely made its entry into the U.S. In those dark days of 2020, few people needed convincing from their state authorities to hunker down. Many, if not most, just did it naturally. Sadly, this created a brutal headwind for the Las Vegas economy.

In 2020, visitor volume to Sin City totaled slightly over 19 million, a staggeringly low number not seen since 1989. But the back half of last year has been much more robust, with pent-up demand justifying the speculative fervor in these stocks.

Moving forward, investors should carefully watch economic developments. Though many signs offer encouragement, the overall situation remains delicate. Likely, a controlled and disciplined approach to casino stocks will work out best in the long run.

Frequently Asked Questions