Time To Spin The Wheel On Casino Stocks?

Convention goers, gamblers, tourists and investors alike are no doubt familiar with casinos, but the Market Vectors Gaming ETF BJK, the only ETF devoted entirely to the global gambling business, toils in relative anonymity. Just past its fourth birthday, BJK is neither large (just $84.1 million in assets under management), nor heavily traded (just over 27,000 shares per day on average.)

Those numbers mean a lot of investors have missed out on one of 2012’s better sector ETFs as BJK has returned over 18%. As a group, casino stocks have gotten a lift from a rebounding global economy. The Nevada Gaming Control Board recently the state’s gambling revenue climbed 5.7% to $932.2 million in February. Gambling revenue in Macau, the world’s largest gambling hub and the only Chinese territory where gambling is legal, surged 24% to $3.12 billion in March.

All of that has been very good news for Las Vegas Sands LVS, the operator of the Venetian in Las Vegas, among other resorts. Las Vegas Sands is also a major player in Macau and that dual exposure has helped the shares soar almost 40% this year. The company’s international plans don’t end in Macau as chairman and CEO Sheldon Adelson is reportedly looking to spend $35 billion to develop another Las Vegas in Spain.

Las Vegas Sands will continue to look to expand in Macau and the company’s Singapore casino, Marina Bay Sands, is one of the most profitable in the world, according to Fox Business.

Shares of Wynn Resorts WYNN, operator of the Wynn and Encore hotels and also a major player in Macau, have performed well this year, but have also easily been outpaced by rival Las Vegas Sands. Arguably, the stock has been hampered by Wynn’s rift with Japanese billionaire Kazuo Okada. Wynn sued Okada in February and redeemed his 20 percent stake in the casino operator saying he was “unsuitable” based on findings that he made improper payments to Philippine gambling officials, according to Bloomberg News.

Decimated by the financial crisis and concerns about a double-dip recession in 2011, shares of MGM Resorts International MGM have climbed more than 30% this year. No one has more Las Vegas rooms than MGM, but the company also has $13.6 billion in debt. Should MGM should healthy top and bottom line growth, that could leader to better credit rating substantial savings on debt interest.

Newly public Caesars Entertainment CZR is intriguing. The balance sheet is downright concerning with long-term debt of $19.8 billion and other long term liabilities of $6.1 billion, but Caesars is the high risk/high reward play of the companies with significant sin city exposure.