Is This Gaming Company Tomorrow's Monster Stock?

Stocks climbing to 10 times their original price are rare breeds -- but they're not impossible to find. Especially when you have Fools for friends. 

The market's best stocks include companies that have risen dozens of times in value by taking advantage of the market's weaknesses. These aren't penny stocks; they're viable companies with sound business prospects that are achieving phenomenal returns. Finding just one or two of these monstrously successful firms can help you establish a winning portfolio.

Stalking the monster
To find tomorrow's winners, we've enlisted the help of more than 180,000 monster trackers at Motley Fool CAPS who have successfully picked stocks that have doubled, tripled, or even quadrupled in price. This week All-Star member sj1987 gives us casino operator Las Vegas Sands (NYSE: LVS  ) as his next monster pick. He made his mark with Rackspace Hosting, which surged 440% after he picked it to outperform the S&P 500, which was up only 12% in the same time frame.

Of course, you shouldn't jump into the breach just because an All-Star stock picker did. Just consider this as a starting point for your own research of extreme buying opportunities.

Las Vegas Sands Snapshot

Market Cap $32.9 billion
Revenues, TTM $10.3 billion
1-Year Stock Return (6.5%)
Return on Investment NA
Dividend/Yield $1.00/2.50%
Recent Price $39.95
CAPS Rating (out of 5) ***

Source: The Motley Fool.

A roll of the dice
The odds certainly seem long that casinos will come up as winning bets. Nevada gambling revenues fell 6% in June while Las Vegas Strip receipts, which account for half of the state's haul, dropped 4.5%. And for those gambling houses like Las Vegas Sands that wagered China's Macau would pay off, it's coming up craps there, too, as June gambling revenues were up an anemic 1.5%, the slowest rate of growth since 2009. Last year the Chinese gambling mecca raked in 42% more than it had in 2010, but Fitch Ratings sees only 10%-12% growth this year, down from a previous estimate of 15%; it's the second time it cut estimates.

According to the Fool's gaming guru Travis Hoium, with Las Vegas Sands owning some of the best properties in the industry it's a better bet for risk-averse investors, though in a head-to-head matchup against Melco Crown Entertainment (Nasdaq: MPEL  ) , Travis thinks greater upside can be had in Melco. But both missed estimates in the second quarter as the slowing Macau market took down everyone.

Momma needs a new pair of shoes!
Wynn Resorts
(Nasdaq: WYNN  ) saw revenue fall 8% in the quarter as competition, particularly on the Cotai peninsula, got more intense, while Caesar's Entertainment (NYSE: CZR  ) saw sharply wider losses as it built out its presence on the Chinese island. Coupled with flagging U.S. revenues, the market hasn't been giving the casino operator the royal treatment since its IPO earlier this year. Its stock is down more than 50% from the highs it hit upon going public.

MGM Resorts (NYSE: MGM  ) was the one surprise as its China operations enjoyed a 6% increase in quarterly revenues. It's looking to build a second casino in Macau and anticipates Chinese high rollers will be spending big again soon.

It's for that reason that Las Vegas Sands could hit the jackpot once more. Despite its name, most of its operations are in Macau and it's still in a phased development program there itself. Even with slack revenues in the quarter, Sands still saw significantly stronger gaming volumes across its property portfolio and EBITDA was up 9.6%. It also marked the first time since 2008 it exceeded the market rate of growth in Macau in rolling, non-rolling, and slot gross gaming revenue.

Price is what you pay
At 23 times earnings and 14 times estimates, Las Vegas Sands isn't exactly cheap, but I wouldn't run away from it either.

But CAPS member danconfund doesn't think he's ready to put his chips on the casino operator yet as there are still too many unknowns to play out first, including some new criminal allegations. While I'm not sure they'll hold up to closer scrutiny and a rebound in China's economy will get the VIPs flying into Macau again, it's the valuation that bothers me more. I'm holding off making a CAPScall right now, but only on the hopes of catching better prices.

Tell me in the comments section below, however, whether you'd roll the dice with Las Vegas Sands at these levels.

A chance for scary growth
It also doesn't hurt that Las Vegas Sands is one of the few casino plays paying a dividend. For dividend fans, The Motley Fool found two fistfuls of stocks that also like paying back money to their shareholders. Find out which companies they are in our free report, "Secure Your Future With 9 Rock-Solid Dividend Stocks," available for immediate download.

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (4) | Recommend This Article (6)

Comments from our Foolish Readers

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 August 13, 2012, at 3:52 PM, JF125780 wrote:

    Very interesting and informative article Rich.

    What I can't understand is why anybody would panic if Macau who racked in 42% more in 2011 only racked in another 10% to 12% estimated for 2012?

    If I invested in a business that was showing a profit year in and year out and growing such as LVS then I cerntainly would not sell my cash cow.

    Danny Kowkabany

  • Report this Comment On August 13, 2012, at 8:15 PM, cp757 wrote:

    The fact is Net revenue increased to $2.58 billion up (+10.1%).

    In the first half of the year Las Vegas Sands had Adjusted property EBITDA of 1,954,7 billion dollars on pace for 3,909,4 billion dollars for the year. The last two quarters will be stronger and give LVS over 4 billion in EBITDA. No other gaming company will come close.

    In Macau the reason Las Vegas Sands is going to dominate the market is because they have a total Table Capacity of 1,535 mass tables and thats 27% of all the mass tables, the other 5 operators average 14.6% of the table Capacity each.

    Las Vegas Sands has the highest number of Slot and ETG Capacity with 6,000+ slot machines and ETGs thats over 31% of all the slot machines in Macau and all the other operators average 13.8% of the slot Capacity each.

    The Hotel Rooms in Macau that Las Vegas Sands will open over the next few months is 9,324 4/5‐star hotel rooms. Thats 39% of all the 4/5‐star hotel inventory and the other operators average just 12.2% each

  • Report this Comment On August 13, 2012, at 11:54 PM, mountain8 wrote:

    Maybe overreaching?

  • Report this Comment On August 15, 2012, at 12:32 PM, cp757 wrote:

    News Flash August 15th 2012. Share holders in Las Vegas Sands are getting dividend checks every 90 days. At the present time the yeld is 2.5% but Sheldon Adelson wants to raise that amount. He is the owner and CEO of Las Vegas Sands.

    The dividend checks are almost a billion dollars now. Sheldon Adelson owns 431 million shares and gets over 100 million dollars every 90 days. He gets 1.18 million dollars a day just from his dividend. No other company makes that kind of bottom line profit.

    Sheldon Adelson could give 85 days of his dividend checks to help "Republican Candidates" in this election cycle. He has already given 29 days of dividends so he only needs to give another 56 days of dividends to help the opposition.

    Bill Maher, is a comedian and actor, and has a net worth of $23 million dollars. He will give 1 million to Obama's campaign. Adelson is worth 26 billion dollars and will give 100 million to the opposition.

    To date no investigations are taking place into Bill Maher actions. I must make this clear no corruption is being alleged about Bill Maher. The 23 million dollars he has in that bank, came from his sense of humor alone. He has nothing to hide and he will work with the justice department on any concerns.

    We need an adult in the room.

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