Anyone who's ever been to Las Vegas knows that the only sure winner is the house. That's why many investors like casino stocks so much, because over the long run, they've been highly profitable investments that have in many cases produced impressive returns for their shareholders. Yet as with any market sector, there are nuances to the casino industry that require some thinking before you simply go out and buy a particular resort operator's shares.

To invest in casino stocks, you'll need to come up with answers on some key issues:

  • Do you want exposure to the Macau market?
  • How comfortable are you with the prospects for U.S. regional casino resorts?
  • Would you prefer an exchange traded fund to buying individual stocks?

We'll look at each of these questions below.

Important casino stocks


Market Capitalization

1-Year Return

Las Vegas Sands (NYSE:LVS)

$55.8 billion


MGM Resorts International (NYSE:MGM)

$18.8 billion


Wynn Resorts (NASDAQ:WYNN)

$16.9 billion


Melco Resorts and Entertainment (NASDAQ:MLCO)

$14.8 billion


Boyd Gaming (NYSE:BYD)

$3.8 billion


Penn National Gaming (NASDAQ:PENN)

$2.6 billion


Pinnacle Entertainment (NASDAQ:PNK)

$1.8 billion


Data source: Yahoo! Finance.

Macau or no Macau

The most important distinction among casino stocks is whether they have exposure to the Asian gaming capital of Macau. This former Portuguese colony reverted to Chinese hands in the late 1990s, creating considerable uncertainty about its future after more than a century of legalized gambling there. Yet Macau's history managed to survive, and the tiny area just west of Hong Kong became the premier Asian destination for casino gaming, with Las Vegas Sands opening its Sands Macao resort in 2004, and other major players like Wynn and Melco following suit. Macau has become more important for Sands and Wynn than Las Vegas, despite the fact that both casino giants are headquartered in the Nevada gambling mecca.

Exposure to Macau has been a double-edged sword. During the growth phase, Macau exposure helped casino stocks bolster their growth. When Macau went into a prolonged pullback, it sent Wynn and Sands sharply downward, even as other casino stocks without exposure in Asia did better. Macau still has promise, but you have to decide whether you want companies with a major presence there or prefer those that focus on other areas.

Macau skyline at night, with view of harbor and major casino buildings.

Macau. Image source: Getty Images.

Prospects for regional casinos

For a long time, Las Vegas and Atlantic City were the two major gambling centers in the U.S. market. Most successful casino operators therefore located their businesses there. Over time, though, legalization of gambling across the nation has made it easier for casino operators to establish a more regional presence. Key areas include the Mississippi River Basin, where river gambling is largely legal. During Macau's pullback, these regional operators thrived because they had absolutely no international exposure and could focus on serving customers bolstered by the strengthening U.S. economy.

Consolidation in the regional industry promises to shake things up. Penn National just announced that it would buy Pinnacle Entertainment for $2.8 billion. In order to avoid antitrust concerns, the two resort operators agreed to sell four of their properties to Boyd Gaming, which has properties both in Las Vegas and around the country. Yet larger players are also looking at regional casinos, including Wynn Resorts' planned property in Boston. As gambling expands, the regional outlook will be increasingly important.

A casino ETF

Finally, if you prefer not to choose individual investments, there's a fund that specializes in casino stocks. The VanEck Vectors Gaming ETF (NYSEMKT:BJK) holds 40 stocks in the gambling industry, including not only the casino resort companies listed above, but also international internet gambling companies. You'll also find some exposure to companies that supply casino resorts, such as slot machine manufacturers.

The ETF doesn't give the focused exposure to casino resort companies that some investors might prefer. Yet with a broader scope covering all of the gaming industry, the ETF might actually provide more valuable diversification than investors would generally expect from a sector-specific fund.

Should you bet on casino stocks?

In the long run, the casino always wins, but that doesn't mean every casino stock will bring long-term riches to shareholders. Deciding to what extent you believe in the future of Macau and of regional U.S. gambling centers is critical in determining what your returns are likely to be.

Dan Caplinger owns shares of Wynn Resorts. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.