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

Las Vegas Sands Corp. (NYSE:LVS) came in at second with 31 filers. Again, Las Vegas Sands expects its growth to be driven by solid performance in Macau. Las Vegas Sands pays a 2.1% dividend yield, which is one of the highest in the industry. Las Vegas has also made recent initiatives to return capital to shareholders and might be the next gaming stock to explore the REIT structure. Las Vegas Sands recently announced a $2.75 special dividend. This comes after the gaming stock upped its regular dividend to $1.40 annually. Revenues are expected to be up 19% in 2012 before reaching double-digit growth in 2013 as well. In addition to its leading dividend position, Las Vegas has solid prospects in the Singapore market – a limited competition and high margin market – with its Marina Bay Sands resort. Billionaire investor and founder of Citadel Investment Group Ken Griffin was one of the firms loving Las Vegas last quarter; he upped his stake over 50% (see Ken Griffin’s newest picks).

Melco Crown Entertainment Ltd (NASDAQ:MPEL) came in as the top casino stock with 32 filers – after a net increase of 11 filers – the largest of our five stocks. Given the expected revenue drivers of the other four casino stocks, which are expected to see the majority of interim revenues driven by Macau properties, it is easy to see why Melco is number one. Melco operates primarily in the Macau region, where casinos are expected to outperform other areas such as Las Vegas given their greater exposure to rising discretionary income, which in turn, will spur higher visitation rates. Macanese gaming revenues were up over 40% in 2011 and should continue to accelerate in the future. This should help drive Melco’s industry leading five-year expected EPS growth rate of 36% annually. Melco was one of Moore Capital and its billionaire founder Louis Bacon’s bullish bets during the third quarter.

We believe that investors might be able to find significant value in casino stocks as an increase in discretionary spending drives the industry higher, and the potential for unlocking shareholder value becomes evident with possible REIT conversions.