The casino industry was one of the first to get disrupted from the spread of coronavirus. As the epidemic surged in China, the Macao government implemented containment measures resulting in the complete shutdown of casino hotels on the island in February 2020. The three largest casino companies Wynn Resorts LTD (NASDAQ: WYNN)
, Las Vegas Sands Corp (NYSE: LVS)
and MGM Resorts International (NYSE: MGM
) were the first to feel the material financial impact of COVID-19. With virtually all travel, hotel and leisure industries completely shuttered from ongoing social distancing mandates, stocks have experienced unprecedented fallout both in terms of magnitude and velocity is the S&P 500 (NYSEARCA: SPY)
proceeded to collapse over (-35 percent) off highs in March 2020. As the smoke clears, an opportunity may present itself to risk-tolerant traders and investors seeking to capitalize on recovery.
As the COVID-19 pandemic spread into the U.S., casinos were eventually forced to shut down their signature properties in Las Vegas and nearly all domestic operations. On March 17, 2020, all Nevada casinos were ordered to shut down as per Governor Steve Sisolak under the nonessential business order. MGM had started to close Las Vegas properties on a rolling basis as early at March 9, when several casino employees tested presumptive positive for COVID-19. MGM National Harbor casino was shut down on March 15, as per Maryland Governor Larry Hogan. LVS and WYNN casino properties were shut down as per Massachusetts’s gaming regulator on the 15th as well. The all too familiar template of state and gaming regulator mandated shutdowns has continued to shutter operations for the big three casino stocks. However, as the U.S. and European nations commence shutdown, China claims to be returning back to capacity.
The coronavirus originated in Wuhan, China in December 2019. By mid-January it quickly elevated to become the epicenter of China’s COVID-19 outbreak. The government quickly placed entire cities and hundreds of millions of residents on lockdown. By erecting makeshift hospitals, enforcing strict curfews and dispatching first response teams into communities, the Chinese government claims their prompt extreme measures enabled them to cap the epidemic. According to state officials, COVID-19 peaked around Feb. 12th when daily cases reached 15,000. New cases and infections have maintained and almost extreme trajectory since the peak. Simultaneously, other global nations started seeing COVID-19 infections and subsequent deaths spike lead by Italy. While global media coverage migrated to covering the spread in the United States and European nations. China has been rapidly reigniting their economic recovery as workers are mobilizing in greater numbers. As of March 25th, China claims to have resumed nearly 80 percent of the nation’s productivity and output capacity and new daily COVID-19 cases have drop to single digits. While pundit question China’s claims, U.S. companies are validating the resumption of operations in China. The question abounds whether the China template will apply to the U.S. in terms of flattening the curve and driving an economic recovery.
Las Vegas Before the Shutdown
Nevada state gaming revenues increased to $1.04 billion in February 2020, up 3.05 percent Year-over-Year (YoY) ahead of the March-April 2020 shutdown. Downtown Las Vegas casino revenues fell (-4.4) percent YoY to $55 million, likely reflecting the drop off of in international tourism. Las Vegas Strip revenues accounted for just over half the total take for the state at $596 million, up 0.8 percent. Total slot revenues grew 6.06 percent YoY. The big three casinos will need international tourism to recovery rapidly to launch a recovery. This will rely heavily on when the airlines will resume international flight routes.
Macao (Sort Of) Back in Business
The Macao gaming authority was one of the first regulators to mandate the shutdown of casinos during China’s outbreak. They were also one of the first to start to resume casino operations. As of March 25th, Macao claims 80 percent of the island’s casinos have reopened for business. That’s optimistic, however, the question is how fast the demand will recover. The big three casinos WYNN, LVS and MGM will get the most impact from this segment. However, China is implementing suspension of travelers flying into the country as of March 29, 2020, based on 54 of 55 new infections being “imported” from foreigners entering the country on March 26th. This includes its own citizens, which could make travelers reluctant to leave the borders.
Opportunistic Buy Levels
Using the rifle charts on weekly time frames helps to lay out the playing field and compare the peers in a more suitable manner for swing traders and investors. The big three casinos (WYNN, LVS, MGM) share strong positive correlation with each other, which makes it easier to spot the laggard. The order of momentum starts with WYNN then moves to LVS and finally to MGM. While WYNN and MGM both bounced through their respective weekly 5-period moving averages (MAs), MGM has yet to test it. This makes MGM the laggard of the three, which poses potentially greater upside. All three weekly stochastics have make full oscillations down to or through the 20-bands. From here, either the market structure low (MSL) trigger breaks will form a stochastic cross up or form another selloff on the weekly 5-period MA rejection back to the weekly lower Bollinger Bands. Traders can react at each of the three levels MSL trigger, Weekly lower BBs and MSL, while investors may consider scaling in at each level.
Here are three opportunistic price entry levels for each of the big three casino stocks utilizing rifle chart and Fibonacci (fib) levels . Expect to add at each level if they test to get a favorable average price. WYNN shares coiled off $38.16 fib/MSL to peak at $83.87 MSL trigger with lower BBs at $50.86. LVS shares coiled off $33.66 fib/MSL to peak at $52.93 MSL trigger with lower BBs at $41.86. MGM shares coiled off $5.90 MSL to peak at $15.30 MSL trigger with lower BBs at $9.07. These are the three areas to scale into positions if holding for a long-term recovery. Always make sure to game plan your trade well in advance.
8 Stocks Under $10 and On Sale Right Now
During times of market volatility, investors are looking to get return anywhere they can. One approach is to find cheap stocks (i.e. stocks that trade for less than $10). It’s not surprising that many of the cheap stocks can be found on Robinhood. This trading app is popular among millennial investors. And those investors are willing to speculate on cheap stocks.
And it’s easy to see why. Buying 100 shares of a stock that is trading for $5 can seem to be a wise investment if the stock moves higher. After all, if the stock price increases just $1, investors can see a 20% gain.
But that is not always the case. In fact, it’s not usually the case. The trap that some investors fall into is believing that these stocks can be the next Amazon or Apple. And while they do offer a potential reward, they also carry significant risk. It’s important to remember that when a stock is selling for less than $10, there’s usually a reason. And in some cases, it means the stock is under selling pressure.
This is one time when it’s important to remember that inexpensive does not necessarily mean the stock is a good value. However, there are some quality stocks that can be found in the bargain bin. And for many of these stocks, the value is found in a solid dividend that can reward income investors.
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