- With a global credit and liquidity crisis, it’s no surprise that one of the most leveraged sectors has grossly underperformed. Strangely, the valuation variance across the gaming sector is low. BYD and PENN own the liquidity in the industry, yet trade roughly in-line with the group. PENN runs at least 3 turns below the average gaming leverage ratio and BYD, while at average leverage, should be able to de-lever faster than the rest.
- The opportunity is glaring. The companies that risk managed their liquidity and balance sheets smartly (BYD and PENN) are lumped in with the rest because they are gaming stocks. As can be seen in the second chart, PENN barely outperformed the group this year and BYD underperformed. Strange that the factor that has caused gaming to underperform the market so sharply wouldn’t also drive relative value. That’s not sustainable.
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