5 Stocks to Consider Before Buying MGM

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I'm going to play devil's advocate here for a moment. Too many investors get excited and jump into a stock without comparing and contrasting against other possibilities. So before buying shares in casino behemoth MGM (NYSE: MGM  ) , read on as I give you one (hopefully) compelling reason to consider one of these five other stocks.

Let's start with the obvious ones: Las Vegas Sands (NYSE: LVS  ) , Melco Crown Entertainment (Nasdaq: MPEL  ) , and Wynn (Nasdaq: WYNN  ) .

MGM is a big-time Vegas player with its new City Center complex, the Bellagio and its beautiful fountains, the MGM Grand, and so on all the way down to Circus, Circus. However, it doesn't have nearly as much international exposure, specifically in Asia, as these three.

Las Vegas Sands gets about 70% of its revenue from its properties in Macau -- China's version of Vegas, except bigger. And its huge Marina Bay Sands complex just opened in Singapore in June. To give you an idea of its size, its cost to build made it the "world's most expensive stand-alone casino property."

Melco Crown takes it a step further and is a pure play on the Macau gaming market. It operates three different properties: the Mocha Clubs, the Altira Macau (complete with 6-star casino), and its flagship City of Dreams, which opened last summer. (For a five-minute rundown of its operations, click here).

Meanwhile, Wynn combines a sizable presence in both Vegas and Macau with a visionary leader – Steve Wynn. Wynn was the guy behind many of MGM's Vegas properties including the Bellagio and the Mirage.

But let's leave the world of hotels and casinos for two gambles of a different kind: YRC Worldwide (Nasdaq: YRCW  ) and Ambac Financial (NYSE: ABK  ) .

MGM fans know that it had a tremendous run-up last year as fears of bankruptcy dissipated in the face of a recovering economy. Trucking outfit YRC Worldwide offers a similar binary opportunity. If it can return to profitability and handle its hefty debt load, it could be a multi-bagger from here. But that's a big "if."

I recently highlighted municipal bond insurer MBIA (NYSE: MBI  ) as a left-for-dead stock that could be a huge opportunity. Its fellow insurer Ambac Financial provides an even bigger gamble than MBIA and perhaps more action than any of MGM's table games.

Both MBIA and Ambac got into trouble when they delved into insuring real-estate-backed securities. Ambac trades close to death's door at around $1 a share. The gamble is very real -- the company is extremely hard to value and these shares could go to zero. But like YRC Worldwide, the upside opportunity is likely greater than MGM's at current prices.

A parting shot
As you decide between MGM and these other alternatives (or none of the above), remember that one compelling reason does not an investment thesis make. Each reason is merely a starting point. Good luck!

For more stock ideas, check out what could be the best opportunity in a decade

Anand Chokkavelu owns shares of Melco Crown. You can follow him on Twitter. Melco Crown Entertainment is a Motley Fool Global Gains pick. The Fool has a disclosure policy.

Read/Post Comments (2) | Recommend This Article (12)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 28, 2010, at 2:07 PM, rodeduivel wrote:

    I agree MGM has a poor exposure in Asia as opposed to companies as LVS. Having said that MGM is starting to manage its debt better, becomes more profitable and will start benefiting from Citycenter although they had big troubles with it at the beginning stage. People love to critize MGM but if you want it or not, it will easily rise to $16 in the next months with or without you.

  • Report this Comment On July 28, 2010, at 2:57 PM, l8gin1 wrote:

    This is a very dumb article comparing gambling sector to trucking industry or banking business.


    Ignore !!

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