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.

Telsey Advisory Initiates Coverage on Casino Stocks: MGM Resorts International (MGM) and Boyd Gaming Corporation (BYD)

The stocks of MGM Resorts International (NYSE:MGM), Boyd Gaming Corporation (NYSE:BYD), and Churchill Downs, Inc. (NASDAQ:CHDN) are trading up after Telsey Advisory Group initiated coverage on them. MGM Resorts started the day on a higher note, gaining 4.05%, while Boyd Gaming Corporation and Churchill Downs, Inc. are up by 3.42% and 2.55%, respectively. According to a report from CNBC, Telsey has started coverage on these companies with an “Outperform” rating because of the positive movement in the Las Vegas market. However, the research firm maintained a dingy outlook for the Macau region, whose August gaming revenues declined by 35.5% on the year to $2.3 billion. The gaming revenue of the Chinese casino hub has maintained its downward trend for the last 15 months.


MGM Resorts International (NYSE:MGM)’s stock has a consensus price target of $25.28, indicating a premium of almost 20%. The positive sentiment about MGM Resorts International from Telsey appears to be shared by the hedge funds that we follow. At the end of the second quarter, a total of 58 funds held long positions with an aggregate value of $1.74 billion. The total value of their holdings declined 1% in comparison with the first quarter, indicating additional share purchases from ‘hedgies’, as the stock lost 13.22% during the period. Daniel S. Och’s OZ Management and Bain Capital’s Brookside Capital were the top shareholders of the company, holding 11.23 million shares and 11.21 million shares, respectively.

Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is the small-cap stock picks of hedge funds. Our research has shown that 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 118% over the ensuing 60 months, outperforming the S&P 500 Index by nearly 60 percentage points (read more details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.

The stock of Boyd Gaming Corporation (NYSE:BYD) has a short-term price target of $17.94 from nine analysts, with a growth potential of 8% from its current trading price. The smart money held a slightly bearish outlook on the gaming company during the second quarter, as the aggregate value of their holdings was up by only 3.03% on the quarter, amid a 5.28% gain of the stock. The number of hedge funds with long positions improved by one to 29 duriong the second quarter. PAR Capital Management and H Partners Management have large stakes in the company, holding 7.66 million shares and 4.21 million shares, respectively.

Churchill Downs, Inc. (NASDAQ:CHDN) announced a capital project worth $18 million on September 1 for the modernization of its Turf club and other areas of the iconic track. The stock of Churchill Downs has surged by 42.92% since the beginning of the year and it has also gathered interest from hedge funds from our database as heading into the third quarter, a total of 22 investors were long on the stock, an improvement of one from the previous quarter. Moreover, the total value of their holdings jumped by 10.24% on the quarter to $667.04 million. PAR Capital Management held the largest stake in Churchill Downs, Inc. (NASDAQ:CHDN), holding 1.29 million shares followed by Three Bays Capital, with 1.13 million shares.

Disclosure: None

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.