I’m a pure fundamental guy so I sometimes need help when it comes to entry points. Luckily, I’m partnered with Keith McCullough who is the best trader I know. Here are some of his comments:
• PENN: the best looking gaming stock, strong support built up at $17.86, closing above $23.26 and this one is off to the races
• BYD: doesn’t look great but support at $3.64
• ASCA: doesn’t look so good
• MGM: right on the line. bias to the short side
• WMS: massive resistance line developing at $26.59, breaking down and closing below 22.87, and $19 is in play
• WYNN: anywhere under $32 and I would buy the whole company
• HMIN: flashes another positive divergence today, stock shaping up – needs to hold $9.18
• CCL: breaking down and closing below $20.52 is a big problem for this one, particularly if I am right on an oil squeeze coming
Here is my fundamental retort:
• PENN: the safest play in gaming right now. Great management team on the right side of the liquidity trade. Near term numbers are not good but PENN is poised to leverage its liquidity with a value creating acquisition (PNK? See my post LIKE PEANUT BUTTER AND CHOCOLATE – 11/11/08).
• BYD: the cheapest stock on a free cash flow basis I’ve ever seen with a 40% yield. The numbers will ugly for awhile but the company’s liquidity will allow it to steal market share, particularly in the Las Vegas locals market.
• ASCA: Q2 covenant bust is a mathematical certainty unless they raise sub debt. For this reason company is over-earning and estimates will fall 20% when they raise sub debt with a rate in the mid to high teens.
• MGM: LV is a disaster and getting worse. MGM is the poster child of the egregious exploitation of the easy money crowd. CityCenter is the wrong project at the wrong time in the wrong market. Overleveraged with little liquidity could pave the road to bankruptcy.
• WMS: Industry slot sales will fall off a cliff in 1H CY2009 due to cash strapped casinos delaying replacement sales and a dearth of new casinos and expansions. Yet, analysts continue to project 10% revenue growth over that time period. Pricing could be the next shoe to drop.
• WYNN: Great balance sheet, tons of liquidity, best operator, and exposure to the best long-term market in the world (Macau). Where do I sign up? Short term guys should wait for Keith’s levels on this one. Near term is choppy.
• HMIN: We like China. Citizens are traveling more. Solid long-term fundamental story.
• CCL: Industry Capex going up, cost of capital going up, ROI declining. On board spend ready to drop off a cliff.