Institutions Doubling Down on MGM

It’s been busy over at MGM Mirage (NYSE: MGM), and not entirely in a good way.

Billionaire investor Kirk Kerkorian has been talking about dumping his 37% stake, the Chinese government has come up with new casinos hurdles, and MGM has been trying to raise $2 billion for a Macau IPO similar to rival Las Vegas Sands (NYSE: LVS) and Wynn Resorts (Nasdaq: WYNN).

The interesting thing is that against this convoluted backdrop, institutions have been adding to their stakes in MGM.

Seven out of the top ten institutional holders have opened new positions, or added to current holdings. For many it’s prudent dollar cost averaging, but it might be a little more than that.

The top nine institutions holding MGM added a collective 71 million shares to their portfolios. Institutions like T. Rowe Price, Fidelity Management, Janus Capital, Barclays Global and Vanguard are a who’s who of capital management.

To see why they are piling in we need look no further than Macau.

Macau: China’s Gambling Mecca

The nascent resurgence in gaming stocks seemed to come to a screeching halt recently as the Chinese government announced that they would increase regulation on Macau casinos.

Specifically they want to target the number of slots, move the location of gambling halls away from neighborhoods, set decency rules to curtail prostitution and age limits to stop underage gambling.

The proposed changes seem to have sent a chill up the spines of the casinos. It’s very apparent that the street is concerned these rules may throw cold water on the Macau party.

But they’re all wrong.

In fact, these new rules will protect and even enhance the profits that these casinos can make overseas at Macau.

By limiting the number of new licenses, they effectively bar new participants from entering their market, and by specifying where a casino can be located, they encourage the travel to centralized gaming centers – namely the mega resorts into which these companies have poured billions.

How do you spell monopoly in Chinese?

In short, the Macau casinos are going to be protected by these new regulations, which will only add to their bottom lines. Moreover, the big three American companies LVS, MGM and WYNN, which have all taken it on the chin lately, should all resume their advances.

The big institutions have been piling into the sector lately, but if you place the stock prices in perspective with their 2007 levels, these companies are still down 80% off their 2007 highs. It makes these big three casinos good bets for long-term growth.

Disclosure: No positions in any security mentioned above.

Comments

[Gregjohnson999:]

Alexander, Where did you get your info from ? I am long on MGM but wouldnt that type of purchase make the stock sky rocket ?? please explain. I pray this is a correct artice of facts.
Greg

Oct 23 06:13 PM

[capital pains:]

Since risk has gone completely out of the market why not pour more money into a loser ? If Mr. Kirk has decided fo finally lighten up on his gigantic holdings, why would anyone do the opposite ? Mr. K was decimated with his huge position in MGM - Now it's more botttom fishing time, that's all it is. In case the author hasn't noticed, there is a huge bubble in the Macau market. 25% of the 'whales' constitute 70% of casinos revenues. All casinos vying for the same small pool of fish, does not sound like a recipe for growth. Plus, being tied in with Pansy Ho or any Ho family member is delusional and akin to abetting criminals.
The little guy has long since departed the manipulated, corrupt market. Hence, who cares what the institutions do or don't do ? The last man standing will always be Goldman Sachs, the evil empire incarnate. That's all that matters to our inept government.
If the atrociously managed MGM continues to lose money at a whirlwind pace, and they will, the institutions should be pouring more paper dollars in all the way down. So what ?

Oct 24 12:28 PM

[Gregjohnson999:]

Capital Pains, what a looser you are. I have read some of your comments and i get the feeling you have led a bitter life. Change your attitude in life and your miserable life may turn around. Who are you to make comments on Kirkorian or adelson ? you dont measure up to their dump. Are you a right wing christian nut ? thats what i think you are. Nothing you say will make me feel bad looser. You wish you have my $ 4 million dollar home and my collection of Ferraris. People like you will always be loosers. I want you to go stand in front of a mirror and just scream at your sorry ass self that " I Capital pains am a failure in life and a big looser".LOOSER!!!! LOL!!!


On Oct 24 12:28 PM capital pains wrote:

> Since risk has gone completely out of the market why not pour more
> money into a loser ? If Mr. Kirk has decided fo finally lighten up
> on his gigantic holdings, why would anyone do the opposite ? Mr.
> K was decimated with his huge position in MGM - Now it's more botttom
> fishing time, that's all it is. In case the author hasn't noticed,
> there is a huge bubble in the Macau market. 25% of the 'whales' constitute
> 70% of casinos revenues. All casinos vying for the same small pool
> of fish, does not sound like a recipe for growth. Plus, being tied
> in with Pansy Ho or any Ho family member is delusional and akin to
> abetting criminals.
> The little guy has long since departed the manipulated, corrupt market.
> Hence, who cares what the institutions do or don't do ? The last
> man standing will always be Goldman Sachs, the evil empire incarnate.
> That's all that matters to our inept government.
> If the atrociously managed MGM continues to lose money at a whirlwind
> pace, and they will, the institutions should be pouring more paper
> dollars in all the way down. So what ?

Oct 24 02:08 PM

[J. Bruun:]

Alexander, I think you are getting a two things wrong in this article.

1. MGM is the least exposed to Macau of the three US operators so if you want to play the Macau story play it on the other two.
2. There are only 6 gaming concessions in Macau and it has been like that for many years. 6 I think. This has not changed lately.

Jan

Oct 25 05:47 PM

[User 500862:]

dude take a chill pill....


On Oct 24 12:28 PM capital pains wrote:

> Since risk has gone completely out of the market why not pour more
> money into a loser ? If Mr. Kirk has decided fo finally lighten up
> on his gigantic holdings, why would anyone do the opposite ? Mr.
> K was decimated with his huge position in MGM - Now it's more botttom
> fishing time, that's all it is. In case the author hasn't noticed,
> there is a huge bubble in the Macau market. 25% of the 'whales' constitute
> 70% of casinos revenues. All casinos vying for the same small pool
> of fish, does not sound like a recipe for growth. Plus, being tied
> in with Pansy Ho or any Ho family member is delusional and akin to
> abetting criminals.
> The little guy has long since departed the manipulated, corrupt market.
> Hence, who cares what the institutions do or don't do ? The last
> man standing will always be Goldman Sachs, the evil empire incarnate.
> That's all that matters to our inept government.
> If the atrociously managed MGM continues to lose money at a whirlwind
> pace, and they will, the institutions should be pouring more paper
> dollars in all the way down. So what ?

Oct 27 04:54 PM

[capital pains:]

Does it actually make sense replying to a moron ? Not really because morons are too stupid to know how dumb they are ! The earlier idiotic post by gregg(brainless)johnson proves the point.
First of all - there is no mention of Adelson in the post. Second: It is out of resepct for KK that I say, why buy when KK is unloading.? Although, losing $7 billion on Ford and $15 billion on MGM hardly qualifies KK for MENSA membership...
third: Only a moron would spell loser the way stupid johnson spells it ..Twice no less !
4th - Christian should be capitalized you cretin
5th - Ah yes,we really believe you are wealthy ..That's why you spend time posting on the internet..You should spend some time learning to spell and write ..I would imagine your 6th grade education might be somewhat limiting for you .
Pointless replying to a moron however -


On Oct 24 02:08 PM Gregjohnson999 wrote:

> Capital Pains, what a looser you are. I have read some of your comments
> and i get the feeling you have led a bitter life. Change your attitude
> in life and your miserable life may turn around. Who are you to make
> comments on Kirkorian or adelson ? you dont measure up to their dump.
> Are you a right wing christian nut ? thats what i think you are.
> Nothing you say will make me feel bad looser. You wish you have my
> $ 4 million dollar home and my collection of Ferraris. People like
> you will always be loosers. I want you to go stand in front of a
> mirror and just scream at your sorry ass self that " I Capital pains
> am a failure in life and a big looser".LOOSER!!!! LOL!!!

Oct 30 03:06 PM