The average casino group stock, as represented by the Market Vectors™ Gaming ETF (BJK), is up over 150% since the 2008-09 recession lows. Some casino resort operators such as Wynn Resorts Ltd. (WYNN) and Las Vegas Sands Corp. (LVS) are up as much as eight-fold and thirty-fold respectively from those lows. While stock prices have kept pace with the strong earnings growth at casino companies so far, looking forward, the outlook for the casino group may not be as promising-- as earnings growth is projected to slow down significantly due to difficult conditions both here and abroad. In the U.S., the Las Vegas market is likely to continue to be slow due to the overall slowing U.S. economy. And over in China, there is concern over slowdown in mainland China’s economic growth, as well as a possible clamp-down on Macau by the Chinese government to restrain growth in the former Portuguese colony.
In this article, via an analysis (based on the latest available institutional 13-F filings) of the investing activities of the world's largest fund managers managing between $100 billion and over a trillion dollars, we identify the casino group stocks that are being accumulated and those being distributed by these mega managers. The list includes prominent managers such as Wellington Management ($1.6 trillion in total assets under management), Vanguard Group ($1.4 trillion), Fidelity Investments ($640 billion), T Rowe Price ($330 billion), and Goldman Sachs Asset Management ($580 billion), among others.
We determined based on our analysis that mega fund managers are slightly bullish on the casino. During the June quarter, these mega fund managers together added a net $242 million to their $15.78 billion prior quarter position in the group, selling $1.83 billion and buying $2.07 billion worth of stocks in the group. Furthermore, overall they are under-weight in the group by a factor of 0.6; taken together mega funds have invested 0.3% of their capital in the casino group companies compared to the 0.5% weighting of the sector in the overall market. Incidentally, in our review last month on the investing activities of legendary or guru fund managers in the casino group, we determined that guru managers too were neutral to slightly bullish and they were also under-weight in the casino group by a factor of 0.6.
The following are the casino group companies that these mega fund managers are most bearish about (see Table):
Wynn Resorts Ltd. (WYNN): WYNN is an operator of casinos in Las Vegas and Macau. Mega funds cut a net $161 million from their $4.07 billion prior quarter position, and taken together, mega funds hold 24.2% of the outstanding shares-- higher than their 19.9% weighting in the group. The top sellers were T Rowe Price ($92 million), Janus Capital Management ($76 million) and Capital World Investors ($73 million). Overall, 430 institutions hold 62.6% of WYNN shares, with Waddell & Reed Financial ($2.23 billion) and Marisco Capital Management ($809 million) being the largest holders with 14.4% and 5.2% of the outstanding shares respectively.
International Game Technology (IGT): IGT manufactures computerized casino gaming machines and systems such as spinning reel slot and video gaming machines. Mega funds cut a net $158 million from their $1.97 billion prior quarter position, and taken together, mega funds hold 34.4% of the outstanding shares, significantly higher than their 19.9% weighting in the group. The top sellers were UBS Global Asset Management ($110 million) and Capital World Investors ($95 million). Overall, 352 institutions hold 86.0% of IGT shares, with T Rowe Price ($314 million) and Vanguard Group ($272 million) being the largest holders with 6.2% and 5.3% of the outstanding shares respectively. In our earlier review (linked above) we determined that guru fund managers too were bearish on IGT.
Melco Crown Entertainment (MPEL): MPEL is an operator of casinos in Macau, the former Portuguese colony now a part of China. Mega funds cut a net $80 million from their $580 million prior quarter position, and taken together, mega funds hold 8.1% of the outstanding shares-- significantly less than their 19.9% weighting in the group. The top sellers were Fidelity Investments ($70 million) and Blackrock ($48 million). Overall, 166 institutions hold 7.2% of MPEL shares, with Capital Research Global Investors ($190 million) and Columbia Wanger Asset Management ($139 million) being the largest holders with 1.1% and 0.8% of the outstanding shares respectively. In the earlier review we determined that guru fund managers too were bearish on MPEL.
The following are the casino group companies that these mega fund managers are most bullish about (see Table):
Las Vegas Sands Corp. (LVS): LVS owns, develops and operates various integrated resort properties in the U.S., Macau, and Singapore, including The Venetian Resort Hotel Casino, The Palazzo Resort Hotel Casino, and The Sands Expo and Convention Center in Las Vegas, Nevada; the Sands Macao, The Venetian Macao Resort Hotel, the Plaza Casino, and the Four Seasons Hotel in Macau, the People’s Republic of China; and the Marina Bay Sands in Singapore. Mega funds added a net $552 million to their $5.40 billion prior quarter position, and taken together mega funds hold 17.0% of the outstanding shares, less than their 19.9% weighting in the group. The top buyers were Capital World Investors ($279 million), Neuberger Berman Group ($191 million) and TIAA CREF Investment Management ($108 million). The top mega fund holders, who incidentally were also the top overall holders, were Capital World Investors ($1.25 billion), Fidelity Investments ($821 million) and T Rowe Price ($684 million) that hold 3.9%, 2.5% and 2.1% of the outstanding shares respectively.
MGM Resorts International (MGM): MGM owns and operates casino resorts in the U.S., and offers gaming, hotel, dining entertainment, retail and other resort amenities at its casinos. It has 20 casinos that have almost 35,000 slot machines, 2,000 table games in 2.1 million sq. feet of casino space, and a total of over 50,000 rooms. Mega funds added a net $171 million to their $848 million prior quarter position, and taken together, mega funds hold 19.3% of the outstanding shares-- approximately at par with their 19.9% weighting in the group. The top buyer was Wellington Capital Management ($180 million), and the top holders were Wellington Capital Management ($282 million) and Vanguard Group ($151 million). Overall, 335 institutions hold 54.9% of MGM shares, with Paulson & Co. ($418 million), Wellington Capital Management and Shumway Capital Partners ($182 million) being the largest holders with 8.5%, 5.0% and 3.7% of the outstanding shares respectively.
Click to enlarge
General Methodology and Background Information: The latest available institutional 13-F filings of over 30+ mega hedge fund and mutual fund managers were analyzed to determine their capital allocation among different industry groupings, and to determine their favorite picks and pans in each group. These mega fund managers number less than one percent of all funds and yet, they control almost half of the U.S. equity discretionary fund assets. The argument is that mega institutional investors have the resources and the access to information, knowledge and expertise to conduct extensive due diligence in informing their investment decisions. When mega Institutional Investors invest and maybe even converge on a specific investment idea, the idea deserves consideration for further investigation. The savvy investor may then leverage this information either as a starting point to conduct his own due diligence.
Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are our ‘opinions’ and we may be wrong. We may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to our thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.