The Big Money Says to Buy MGM Resorts

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?

Foolish facts

Metric

MGM Resorts

CAPS stars (out of 5) **
Total ratings 1,346
Percent bulls 81.3%
Percent bears 18.7%
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

Top Owners

2007*

2008*

2009*

Latest*

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
BlackRock 657,630 190,727 8,823,492 10,169,251
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

Company

Institutional Ownership

Insider Ownership

Las Vegas Sands 37.71% 50.28%
MGM Resorts 40.03% 27.29%
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.

Do you agree? Disagree? Let us know what you think using the comments box below. You can also recommend other stocks for me to evaluate by sending me an email or replying to me on Twitter.

Interested in more info on MGM Resorts? Add it to your watchlist by clicking here.

BlackRock is a Motley Fool Inside Value pick. Melco Crown is a Motley Fool Global Gains recommendation. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He didn't own shares in any of the companies mentioned in this article at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of T. Rowe Price and is also on Twitter as @TheMotleyFool. Its disclosure policy is smarter than the average bear.


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