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One of the great maxims of traders and Wall Street pros is to follow the "smart money."
I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.
Next up: MGM Resorts (NYSE: MGM ) . Are institutions bullish or bearish when it comes to this casino operator?
|CAPS stars (out of 5)||**|
|Bullish pitches||191 out of 236|
|Highest rated peers||Full House Resorts, Century Casinos, Melco Crown Entertainment (Nasdaq: MPEL )|
Data current as of Dec. 13.
For as much enthusiasm as some Fools have for Las Vegas Sands (NYSE: LVS ) , a nearly equal percentage believe peer MGM will outperform in the months and years ahead. But TMFMoby, jamesfund7, and RVAspeculator are among the high-rated CAPS investors who have given MGM Resorts a red thumbs-down recently. These and other bearish investors say MGM is putting capital to work in all the wrong places.
"MGM has loaded itself with CityCenter, a major expansion in an overloaded Las Vegas market when the smart money is in Asia. It is too asset heavy and debt-laden and is a bankruptcy waiting to happen," Foolish investor Senescent wrote in September.
I'm not so sure that's fair. As my Foolish colleague Travis Hoium reports, gaming revenue from casinos on the Las Vegas Strip rose 16% in October. The return of double-digit growth could portend an earnings renaissance for MGM, which saw rising margins, rising revenue, and lower losses in its most recent quarter.
MGM also has substantial operations in Asia that are just starting to pay off. And in August, CEO Jim Murren told Bloomberg to expect more MGM expansion in the region.
Institutional ownership history
|T. Rowe Price Group||4,113,794||14,059,213||28,927,056||21,420,263|
|Wellington Management Co.||180,000||180,000||24,363,023||17,867,212|
|Infinity World Investments||-||14,548,738||14,548,738||14,548,738|
|Aletheia Research and Management||145,317||9,523,409||16,043,659||12,807,135|
|TOP 25 TOTAL||14,306,835||47,981,245||129,904,648||140,247,199|
Source: Capital IQ, a division of Standard & Poor's. *Indicates the number of shares owned.
We don't know whether potential expansion in Asia explains institutional interest in MGM Resorts, but Big Money investors appear to like what they see. The top 25 more than doubled their ownership interest in 2009 and have continued buying this year.
There's been profit taking here and there, of course. Fidelity's funds sold nearly 8 million shares after MGM reported positive news out of Macau. T. Rowe Price (Nasdaq: TROW ) sold nearly 13 million shares over the same period.
Competitor and peer checkup
|Las Vegas Sands||37.71%||50.28%|
|Melco Crown Entertainment||25.29%||9.56%|
|Wynn Resorts (Nasdaq: WYNN )||65.16%||18.65%|
Source: Capital IQ, a division of Standard & Poor's. Data current as of Dec. 13.
Should you be thinking longer term? Yes, I think so. For as good as Las Vegas Sands' ownership profile looks, MGM's looks even better. Institutional ownership is nearly as low, and insider ownership, while substantial, doesn't come close to matching that of its rival. The implication? Plenty of shares remain available for Big Money buyers. With MGM's Asian operations expanding rapidly, I believe they'll take the gamble.
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