Shares of MGM Resorts International (MGM) peaked for 2018 (so far) at $38.03 on January 29, 2018 and since then the trend has been brutally downward. The stock’s 50-day moving average broke below its 200-day moving average (a moment that technical analysts called the “death cross”) on May 31. The shares closed at $31.23 today, June 15.
So why do I continue to hold it in the Jubak Picks Portfolio.
Catalyst 1: MGM Resorts finally opened its new casino on Macao’s Cotai Strip. That bumped up MGM’s share of rooms in Macao to 8% from 3% just in time for new infrastructure projects (a Hong Kong bridge, the Pac On Terminal, and the Lotus checkpoint in 2018 and light-rail in 2019) to come on line to relieve bottlenecks in getting people to Macao’s casinos. (MGM holds one of only six gaming licenses in Macao.)
Catalyst 2: The Supreme Court has ruled that states may legalize sports-betting within their borders in spite of Federal regulations. (Up until this ruling, sports betting was legal only in Nevada.) New Jersey, one of the key states in bringing the suit, has already legalized sports betting and on June 15 MGM Resorts brought in the other Dr. J (that’s NBA legend Julius Erving and not yours truly) to place the first bet at its Borgata Hotel Casino and Spa in Atlantic City. Erving bet $5 on the Philadelphia Eagles to repeat as Super Bowl Champs.MGM ha a lot of experience with sports betting from its operations in Las Vegas and I’d expect the company to win a big share of this relatively low margin business.
Catalyst 3: Japan’s Parliament has legalized gambling in the country for the first time and the government is expected to award the first licenses in early 2019. MGM stands a reasonable chance of winning one of those first licenses.
I think the current $31.23 share price represents a solid buying opportunity. (And I like owning this gaming stock because it isn’t in lockstep with other sectors represented in this portfolio.) The shares are up 157.47% since I added them to the Jubak Picks Portfolio on May 4, 2012. I’m even bumping up my target price, slightly, to $40 a share from the prior $39.