Las Vegas Sands: Starting a Position

As I swig on Kool Aid, I've beginning a position in Las Vegas Sands (LVS). I was once worried about bankruptcy here but if MGM Grand (MGM) is considered safe from bankruptcy, LVS is in substantially better shape. We live in a too big to fail society - not just in banks.

I was very bearish on this sector in 2007 and 2008 more on concerns about the consumption crazy American consumer finally needing to act rationally, without his/her house ATM. That was the correct call. However, now we have the government ATM replacing the house ATM. With 1 in every 6 dollars of American income now coming from government handout, who needs the house ATM anymore? Big brother buys things for us now.

While happy with my negative view that preceded the downside, I did not reverse course and get on the money train to the long side once it became clear that casinos were too large to fail. I have no idea how to value Las Vegas Sands but since better run Wynn Resorts is now valued at something akin to 80x 2010 earnings, I guess valuation is a moot point. All that matters are charts nowadays. And LVS has a beauty.


I would like to buy more at $14 or below but we'll begin here with hopes of taking a loss on this first batch so I can buy lower. If instead the stock reverses and we just go ever higher from here, we'll assess adding more on the rebound. The stock was nearly $20 yesterday and right now trades in the $17.30s so we're just establishing a minor position of 0.5% of the portfolio. Obviously as this 13% drop since yesterday's highs shows, this is a very volatile stock and I assume dominated by daytraders so for all we know it could be up 15% tomorrow, or down 15%. Hence we'll move in slowly and space out some limit buy orders from here. $17.00 will be an interesting spot for Las Vegas Sands.

I guess this is just another way to play off the handouts of the government - as government pays for mortgage mitigation, appliance purchases, car purchases, home purchases ... that leaves more money for Americans to fly to Vegas and gamble and see shows. All part of the subsidized American economy, bought and paid for by your grandchildren.

Disclosure: Long Las Vegas Sands in fund; no personal position

Comments

[ts2]

LVS is too dependent on conventions in Las Vegas (if you go to one, they are almost all empty) and Macau is getting really saturated.

disclosure - sold WYNN puts Jan@40

2009 Sep 24 03:50 PM

[TraderMark]

agree on Vegas

I'm short WYNN against this long

If LVS can put up any type of earnings in 2010 it looks like the market is happy to 50 multiples on everything... thats the main play. But I hope it goes meaningfully lower first...


On Sep 24 03:50 PM ts2 wrote:

> LVS is too dependent on conventions in Las Vegas (if you go to one,
> they are almost all empty) and Macau is getting really saturated.
>
>
> disclosure - sold WYNN puts Jan@40

2009 Sep 24 06:00 PM

[Hirschd]

Singapore coming on stream first quarter 2010 and with this monopoly intact LVS will HIT the Jackpot.
Price should catapult to $30!!

2009 Sep 24 06:30 PM

[Ricard]

LOL, hilarious...I was actually thinking about exiting my position. I have LEAPs at 30 exp Jan 2011, a small position that's been a great 3x bagger.

Long term, your decision may be a good one...gambling isn't getting less popular...

2009 Sep 24 06:59 PM

[Roger Knights]

With the market's key reversal day on Wednesday confirmed today, and with futures down after hours, I think the short-term trend at least is down. The new housing sales report tomorrow could be bad. I'd hold off on any more longs in real estate.

2009 Sep 24 09:44 PM

[John Galt]

> I guess this is just another way to play off the handouts of the government - as government pays for mortgage mitigation, appliance purchases, car purchases, home purchases ... that leaves more money for Americans to fly to Vegas and gamble and see shows. All part of the subsidized American economy, bought and paid for by your grandchildren.

Hahahha. I am not sure LVS is in better shape than MGM though? I was thinking about going long MGM when they were at 2 bucks and there were serious worries of bankruptcy and I feel like I missed out. In all reality none of these casinos are out of the woods just yet.

2009 Sep 25 09:08 AM

[papadynamite]

I have seen theSingapore complex. It is amazing! LVS will have a monopoly for several years until Genting builds it's casino on Sentosa Island. The surrounding area, Malaysia, Thailand, Indonesia, even India and Australia will bring in a mutitude of primarily heavily betting oriented Chinese. The profits will be enormous. Due to open in February of 1010.

2009 Sep 25 01:41 PM

[TraderMark]

LVS has a lot of debt

MGM has even "a lot" more than that lol

but as you know in American "free market capitalism" there is no failing... at least if you are a large corporate lobbyist. If you are a small time business person? Nevermind you - shoo away.

Apparently we can buy almost anything now because it won't be allowed to fail. You should of bought MGM. $14B in debt is NO PROBLEMO.


On Sep 25 09:08 AM John Galt wrote:

> > I guess this is just another way to play off the handouts of the
> government - as government pays for mortgage mitigation, appliance
> purchases, car purchases, home purchases ... that leaves more money
> for Americans to fly to Vegas and gamble and see shows. All part
> of the subsidized American economy, bought and paid for by your grandchildren.
>
>
> Hahahha. I am not sure LVS is in better shape than MGM though?
> I was thinking about going long MGM when they were at 2 bucks and
> there were serious worries of bankruptcy and I feel like I missed
> out. In all reality none of these casinos are out of the woods just
> yet.

2009 Sep 25 02:57 PM

[TraderMark]

Yep, as long as the Las Vegas market just stays at current levels, Singapore should provide some of the real sizzle the next few years. I've heard very positive reviews left and right about the Singapore outpost, I'll add yours to the list.


On Sep 25 01:41 PM papadynamite wrote:

> I have seen theSingapore complex. It is amazing! LVS will have a
> monopoly for several years until Genting builds it's casino on Sentosa
> Island. The surrounding area, Malaysia, Thailand, Indonesia, even
> India and Australia will bring in a mutitude of primarily heavily
> betting oriented Chinese. The profits will be enormous. Due to open
> in February of 1010.

2009 Sep 25 02:58 PM