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Las Vegas Sands (NYSE:LVS) has been written off by so many. While not currently priced at bankruptcy anymore as a result of the last couple of weeks of appreciation, its stock has been stripped of almost all value.

One way to look at LVS is to think of it as an option that never expires. This type of 'value' investing usually looks a lot better than it is. There is a reason why stocks go down to value. When the value goes down to the point that people question if the company will go bankrupt, they are normally right. Even when wrong, a stock will often spend the next several years in a price range that could drive the most patient investor mad.

I also believe that when you hear 'this time it's different' you can bet that it's not. With LVS, I do feel that the market has this wrong enough that I am a buyer of LVS. Venetian continues to be able to sell the inventory of rooms and while the pricing is soft, it's not at giveaway prices. Watching the offerings of the room rates, I also see that the best rates have gone up in the past couple of weeks.

There is no question that the stores located in the Vegas property are slow and many will probably not make it. At the same time the floor of the casino is busy and doing well from my observations. Doing well for LVS means the company doesn't appear to be in dire straits as the stock price suggests.

With Macau soft but still growing, you can expect that the casinos may not offer much to the P&L for the end of 2008 but will not be a cash drain either. The important thing to know about Macau is that looking forward it looks good. It's forced to operate with one hand tied behind its back with the visa limits, but that can be expected to be lifted no later than the end of 2009. The reason is simple in that Singapore goes online in 2009 and China will not want to see gaming revenue move away from China. The flights to and from China/Singapore are cheap and and travel to and from is easy. My opinion is that Macau future upside is very attractive when the risk is considered.

We can expect to see Singapore gaming during 2009 and if Macau is a guide, profitability will most likely come at an amazing speed. The Singapore government is very business friendly over all (by many measures more business friendly than in the US) and being a first world city/state you can expect that there will be no or few curve balls thrown.

The other factor is the backing by the largest stock holder. Sheldon Adelson has invested a large amount of money and the recent stock offering at about 5.50 per share and the offering was fully subscribed. Say what you will about Mr. Adelson but he gets the job done. I don't agree with with how much money his office costs and I will go so far as to say that its that kind of attitude that helps get a company in the situation it is in now.

I own LVS shares but I also understand that it may take some time before they get rolling again. That's why I have also written out of the money calls against the stock. I could get more protection from downside risk by writing in the money calls but the stock itself is almost an option as I started this post talking about. As long as I think this company is not going into bankruptcy, I will hold the stock, but the moment I think the debt load is too large to carry, I will close out regardless of the price. At this time I think we are far from it and the negative news is offering an opportunity if done right.

Vegas, as everyone clearly knows, is a tourist town. People with jobs will spend their money and have fun up to the point that they can afford to. With unemployment as of this post running about 6.5-7%, we are only about 1.5% above the amount when times are good. I feel that this is more than offset by the lower fuel costs as a result of oil now trading at less than $41 per barrel.

Lower fuel costs take time to work their way through the economy. While the average consumer may be talking about how much less it cost to fill up the tank, that is actually only a small part of how they will have more money at the end of the month. The price of everything we touch is influenced by the price of oil. Some items like food are hugely impacted and the cost of the food in relation to the average family income is large. This also causes a two way self promoting feedback loop. As consumers have more money as a result of gas prices and food prices (along with everything else) being lower they will spend more. This additional spending will aid employment.

It will also allow those that are employed think of going to Vegas, and when they do, they will find that the cost of a seat on a jet is very affordable as fuel prices have come down. This of course will take some time, but for the California drivers coming in for the weekend, the barrier of entry just came crashing down as well. I am writing so much about this fact because, in my opinion, it is such a big deal that it's a game changer for Vegas.

With price moves up and down over 10% on a daily basis lately, this stock is not for the faint of heart. I have only put enough at risk that I can still sleep at night even when watching multiple down days happen. Of course on days like the last few, it's a little easier to sleep when the stock moves up over 10% for the day.

I have averaged into LVS at 5.78, but with hedging my effective cost is about 5.25. I feel that LVS at this time continues to be a buy on dips below 5.30 but only if you hedge your timing by selling out of the money calls. You may wonder why I don't just simply sell puts but I don't feel there is enough volume and that basically leaves paying near or all of the spread. Options are difficult enough to make money on, and paying the full spread is a recipe for losing.

About three weeks ago I flew to Vegas to see the Venetian for myself and I was amazed at both how well it was doing and how badly. If you work in the many shops or restaurants, you may be spending much of your time looking at help wanted ads as they were not busy. On the other hand, the poker room, which is one of the biggest on the strip, was packed full and had a long waiting list. It also appeared that 'normal' casino floor space was changed over to allocate more space to the poker tournaments that the Venetian was offering.

It's widely known that when it comes to gaming revenue, the poker room is going to be on the low end per square foot. That being said, the machines were also being played at much higher levels in my opinion than what one would expect for a casino about to go out of business. Card tables were mixed and the craps tables looked weak (I spent about an hour at the craps tables as it's a good game to allow you to look around at the casino floor). At the end of my last trip, I could not get a feeling that LVS was filing for protection anytime soon unless business slowed down further.

I am also going back to the Venetian for three days on January 1st to see first hand what the current customer experience is like. I will report my findings in my blog as well as here.

Disclosure: I am currently long LVS.

Source: Las Vegas Sands Hasn't Folded Its Hand Yet