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Typically what happens in Las Vegas stays in the desert city. Unfortunately, that wasn’t the case with the novel coronavirus, which rippled throughout the U.S. and devastated our economy.
Some sectors suffered more than others, including entertainment and hospitality. Frankly, no one wanted to party amid this once-in-a-century pandemic.
MGM Resorts International (NYSE: MGM) is an icon of the entertainment landscape, and during the pandemic, Vegas and other high-traffic areas across the globe became near-instant ghost towns.
Thanks to progress on the vaccination front, speculators are rethinking the narrative for MGM stock. Learn how you can ride the wave and buy MGM stock today.
How to Buy MGM Resorts International (MGM) Stock
In early 2020, MGM Resorts International stock represented a classic contrarian investment. This is when you direct your investment choices against the prevailing sentiment.
According to the Las Vegas Convention and Visitors Authority, the volume of tourists slipped to 106,900 people in April 2020, a staggering 97% loss year-over-year. However, forward-thinking investors gambled that the health threat was only temporary.
Today bullish buyers believe that the vaccine rollout will continue to produce encouraging results, sparking further upside momentum for MGM stock.
Step 1: Pick a brokerage.
Before you can roll the dice on MGM Resorts International, you must first select a brokerage. Thanks to robust competition, you have no shortage of options. And because so many platforms are battling for your investment dollars, the brokerage industry has standardized many incentivizes such as commission-free trading.
The decision comes down to personal preference and your anticipated usage of the platform. For instance, if you don’t have the time to shadow your portfolio, you may want to choose a convenient mobile trading app. On the other hand, if you anticipate building your investing acumen over time, you should consider a more comprehensive solution.
Below is a list of best brokers to choose from.
Step 2: Decide how many shares you want.
Next you must decide how much you want to wager on MGM stock. The actual dollar amount rests on many personal factors, such as risk tolerance and budget size. You will also want to consider how much shares have already gained over the last several months. As such, a correction risk exists, which may influence your decision.
Once you have a target spend in mind, take that dollar amount and divide it by the market price of your prospective stock. Whatever is the whole number is the available share count for acquisition. For instance, if you wish to purchase $1,000 worth of MGM stock, you may acquire 26 shares ($1,000 / $38.41 = 26.03).
Some brokerages allow you to purchase fractional shares. If this is important to you, include it in your criteria of best brokers.
Step 3: Choose your order type.
Because of the constant fluctuations in the equities sector, you must select from different order types to conduct your transactions. Additionally, you will want to educate yourself on how to buy stocks with these key market concepts.
- Bid: The bid is the highest price that a buyer will pay for a stock. It is always lower than the ask.
- Ask: Conversely, the ask is the lowest price that a seller will accept. It is always higher than the bid.
- Spread: The spread is the difference between the bid and ask. This is significant because market makers profit from this bid-ask spread when distributing shares to purchasing investors. Also, the spread is an indicator of market liquidity (a narrow spread usually indicates a liquid market and a wide spread suggests a less liquid market).
- Limit order: If you want to execute a trade at a specific price, you should place a limit order. This order type provides maximum control and transparency over your transactions. However, the disadvantage is that your target stock is not guaranteed to hit the price and trigger the limit order.
- Market order: On the other hand, if you want assurances that your order will go through, then the market order is your best choice. Market orders fulfill at the next available price and settle if placed within normal session hours. But the downside is that market orders execute at the price least favorable to you – buy on the ask, sell on the bid.
- Stop-loss order: A stop-loss order is essentially a protective market order. This order type automatically executes your order at either a specified price or the next available price. While this is useful during periods of market volatility, if the selloff starts at the beginning of a trading session (known as a gap-down session), you can end up selling your position at a far lower than anticipated price.
- Stop-limit order: Similarly, you can think of stop-limit orders as protective limit orders. They only execute at your predetermined price, preventing some of the nasty surprises associated with gap-down sessions. Unfortunately, no guarantee exists that your target stock will reach your specified price. If a stock never recovers, it would have been better to place a stop loss.
Step 4: Execute your trade.
Now that you have a rundown on the mechanics of stock transactions, it’s time to execute your trade. For market orders, use the following steps:
- Select action type (buy or sell).
- Enter the shares you wish to acquire (or sell).
- Place the order.
Limit orders follow an almost identical process, except for the added step of inputting the specified price following the number of shares you wish to transact.
MGM Stock History
During the initial onslaught of the pandemic, only the bravest speculators bought MGM stock. So far, their forecast regarding an eventual return to normal is playing out according to plan. Naturally, MGM shares registered one of the best comeback performances of 2020 because few people gave them a chance.
However, buyers thinking about MGM stock need to think carefully about this opportunity. True, as coronavirus infections decline, consumers will likely resume their normal spending behaviors. At the same time, you don’t know how this crisis will ultimately pan out.
MGM stock has been rising since March 2020 while volume has been steadily declining. Typically you want to see volume confirm the price action — volume should rise as the price rises.
Pros to Buying MGM Resorts Stock
- Still a contrarian opportunity: Despite the enormous runup in MGM Resorts stock, room for additional upside exists for prospective buyers. This is because much uncertainty clouds the economic narrative. Further, a new strain of the virus could see a slowing of a return to normal. You don’t want to necessarily buy with the crowd.
- World-renown brand name: When you think of iconic attractions in Las Vegas, MGM Resorts International is one of the brands that easily comes to mind. Plus, we’re talking about Sin City, a vacation site that attracts people from throughout the world. Once the global vaccine rollout makes progress, MGM stock could jump even higher.
- Pent-up demand: Americans have dealt with long stretches of government-mandated lockdowns. However, it’s not in our nature to stay fearful indefinitely, as the recovery process from Sep. 11, 2001 demonstrated. In other words, this too shall pass.
Cons to Buying MGM Resorts Stock
- Consumers are still fearful: Unlike other catastrophes, the coronavirus has caused broader paranoia, especially in crowded establishments – such as every attraction on the Las Vegas Strip.
- Economic concerns are plentiful: While the stock market has likely exceeded most investors’ expectations, equity valuations don’t necessarily represent economic health. Data points like the personal saving rate soaring to 20.5% on an annualized basis in January 2021 indicate deflationary pressure. This would not bode well for MGM stock.
- Bag-holding concerns: MGM shares enjoyed a remarkable recovery from the lows of 2020, and many speculators find them profitable. They may be tempted to sell, especially with tax day coming up. Therefore, prospective buyers have a risk of holding the bag on a rapidly deflating stock.
A Tempting Contrarian Wager
Current data from the Centers for Disease Control and Prevention confirms the encouraging potency and effectiveness of the COVID-19 vaccine rollout. Many analysts anticipate a return to normal, which represents a huge positive for MGM Resorts International.
On the other hand, prospective buyers of MGM stock will want to be careful. Shares have already moved higher, tempting earlier contrarians to exit profitably. Just as we live in the pandemic, proceed with caution as you weigh an investment in MGM.
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