Gambling My Life Away
My 6th favorite stock is Red Rock Resorts - RRR. They own and operate 17 “locals” casinos in the Las Vegas area, including the brand new Durango.
I have been a gambler since I learned poker in the 5th grade.
I became a card counter/advantage blackjack player when the boats can to Louisiana and Memphis. I played in almost every state, and spent several months in Las Vegas. I stopped playing when the horse track came to Texas in 1997.
I have been in too many casinos to count. I have followed the casino industry since 1984. What a wild ride it has been.
In the 1980’s the great Peter Lynch wrote two important books, “Beat the Street” and “One Up on Wall Street”. One primary theme of these books is “invest in what you know”.
I generally disagree with this thesis, but you might want to have one or two spots in your portfolio for these types of ideas. I think you should go where the value is, and learn to analyze industries where you have little beginning knowledge.
I must disclose that my childhood barber invested in the Lynch style and now sits of multi-million dollar retirement portfolio. There is nothing he enjoys more than talking about the stocks he owns. The valuations were shaky at times, but he survived two big downturns.
RRR’s locals business is distinctly different than MGM or Caesar’s. It is funny, but gambling is the one business were I value “slow and steady”. MGM is doing well in sports gambling, but I do not fully trust all their financial engineering. Some of the others are just too leveraged.
RRR has great real estate assets, and should be able to build a few more casinos like Durango. I have been reading an analyst named Howard Klein on Seeking Alpha for almost 20 years, and he does a good job of telling the RRR story. RRR can drive earning to $4.00/share in the next few years, and deserves a premium multiple.
Growth/Value investor Ron Baron owns 17%.
Again, I would not build a portfolio out of retail, restaurant, hotel/gaming, and media stocks, but it is ok to own a few. If you are a teacher, buy an education stock. If you are a doctor, find a medical stock, but please be sure you diversify.