PENN, MGM, WYNN, LVS, MPEL: 5 Casino Stocks The Smart Money is Betting On

Page 1 of 2

PAULSON & COAfter identifying the most popular stocks among hedge funds (see our entire Top 10 list here) according to their third quarter 13F filings, we have decided to break down the top five stocks that hedge funds love in the casino industry. The top casino stocks should perform well over the interim as a strengthening in the global economy drives increased discretionary spending and corporate travel. Our list includes the hundreds of hedge funds and prominent investors that are required by the SEC to disclose their public equity holdings quarterly. In descending order, we have outlined the most-loved casino stocks based on the aggregate number of funds owning each.

Penn National Gaming, Inc. (NASDAQ:PENN) came in as the fifth most popular casino stock loved by hedge funds with 22 filers. Penn is up almost 30% year to date following its announcement to split the company into two parts. The proposed REIT conversion sets Penn apart from major competitors and will be the first ever casino REIT. Penn does not currently pay a dividend, but following the split, the majority of Penn’s properties will be placed in a REIT and operations will be managed by another publicly traded company. Deutsche Bank puts a sum-of-the-parts valuation on the gaming company at $65 – compared to its $50 current trading price. Penn’s 23x trailing P/E compared to its forward P/E of 17x suggests that investors still might be overlooking the casino’s future potential.

MGM Resorts International (NYSE:MGM) had 23 filers owning the company at the end of 3Q to come in fourth. MGM derives the majority of its revenue from its Las Vegas properties – accounting for 60% of revenue in 2011. Revenues are expected to be up 17% in 2012, helped by the first full year of its China operations.  MGM has also undertaken initiatives to remodel several of its MGM Grand and Bellagio rooms, which should help drive higher visitations in the interim. MGM is expected to post negative full year earnings for at least the next two years while reaching just a 6% annual five-year earnings growth. With the casino stock down 5% year to date and plans for a turnaround effort – not to mention expansion prospects for Macau – hedge funds might be betting MGM can pull off a turnaround quicker than analysts predict. MGM is one of billionaire John Paulson’s top picks; he is the top fund owner of the casino stock and has over 3% of his 13F invested in the casino (check out John Paulson’s newest stock picks).

Wynn Resorts, Limited (NASDAQ:WYNN) has 29 filers as owners to be the third most popular casino stock owned by hedge funds in 3Q. Revenues for 2011 were up 25%, with this casino resort operator also seeing solid growth from operations in China. Wynn trades in the midrange of the industry at 21x earnings, but showed positive trends of late with 3Q EPS coming in at $1.48 compared to $1.05 for 3Q 2011 and estimates of $1.26. Wynn is another casino stock that has showed commitments to returning capital to shareholders. Wynn recently announced plans to pay a special dividend of $7.50 and boosted its regular dividend yield over 100% to $1.00 per share. From a valuation standpoint, Wynn trades in line with its industry peers at 21x.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

The 10 Fastest Supercomputers in the World

The 10 Best Countries for Doing Business 2015

6 Most Expensive Fruits In The World

10 Worst Airlines in the World

The 10 Biggest Tax Havens in the World to Stash Your Money

The 15 Most Murderous Countries in the World

10 Largest Colleges in the World: Bigger Isn’t Always Better

Comedians in Cars Getting Coffee: The 6 Comedians Seinfeld Needs to Interview

Easy Money: The 10 Most Successful Investors in the World Today

The 10 Most Deadly Diseases in the World Today

The 5 Most Expensive Luxury Motorhomes in the World

20 Largest Stock Exchanges in the World

6 Richest Painters In The World 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!