Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Melco Crown Entertainment Ltd (ADR) (MPEL), Las Vegas Sands Corp. (LVS): These Gambling Stocks Can Pay Off

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some gambling-oriented stocks to your portfolio, the Market Vectors Gaming ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

Melco Crown Entertainment (MPEL), Brian Kelly Asian Century Quest

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Market Vectors ETF’s expense ratio — its annual fee — is a relatively low 0.65%. The fund is very small, too, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This ETF has performed reasonably, beating the world market over the past three and five years. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

Why gambling?
No matter whether you approve or don’t, casinos and gambling seem to be here to stay, and the games they offer are designed to make gamblers lose, overall, while the house wins. Not all casino companies are the same, though, so you should choose carefully, or invest in a big bunch via a fund such as this one. Note, though, that the traditional gambling industry is being threatened by the rise of online gambling.

More than a handful of gambling-focused companies had strong performances over the past year. Melco Crown Entertainment Ltd (NASDAQ:MPEL) surged 62%, and is near its 52-week high. Thus, with a forward P/E now above 21, it’s priced for perfection. Its City of Dreams casino on Cotai has been performing well in a great location, and its projects under way include one in the Philippines.

Las Vegas Sands (NYSE:LVS) gained 2%, and recently yielded 2.5%. It’s also looking richly valued. The company seems to have violated some international corruption laws, though that might not be that big a problem. It’s profitable, and its free cash flow has been growing in recent years. With properties in Las Vegas Sands (NYSE:LVS) not performing as well as in the past, this company and many of its peers are looking to Asia for their future growth.

Other companies didn’t do as well last year, but could see their fortunes change in the coming years. MGM Resorts International (NYSE:MGM) shed 10%, facing some tough headwinds that include a massive and growing debt burden. It’s pinning a lot of hope on a Cotai casino under construction, but that isn’t scheduled to open until 2016.

Another good way to profit off of gambling’s growth is to invest in the companies that equip the casinos, such as International Game Technology (NYSE:IGT). Down about 1% over the past year, it recently upped its dividend by 14%, and yields about 1.9%. Better still, its P/E ratio is below its five-year average, and its forward P/E of 11.6 is below that of the S&P 500. It’s getting into the online gaming business, too, and in its recent quarter, reported revenue up 19%, North American product sales up 54%, and social gaming revenue up 15%.

The article These Gambling Stocks Can Pay Off originally appeared on Fool.com.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Loading Comments...