The difference, however, between the gaming operators and some of these financial companies is the gaming operators have hard assets that generate cash flow and are easy to value, and their business models are sustainable with high barriers to entry. The surviving gamers, whose debt doesn’t kill them, will be worth significantly more than where they trade, in my opinion. Pick the survivors and there is a lot of money to be made.
If you believe the financials remain toxic as our Chief Investment Officer Keith McCullough believes, gaming stocks could be a nice hedge to a financials short position when the inevitable short squeeze hits. As can be seen in the following table, the correlation between gaming operators and the XLF was higher than that between the gamers and the S&P over the past two years.