Some Las Vegas casinos are opening up with precautions in place and social distancing in play. Shows are scheduled to reopen slowly in July and more so in August. Do you think visitors are ready to return to Las Vegas in a big way? Are you ready to return, or are you still concerned about Covid-19? Does gambling and merrymaking while wearing a mask turn you on? I have always been a Las Vegas skeptic and am more so now.

Stocks Hammered

Stocks of Las Vegas companies got hammered but have recovered nicely. Las Vegas Sands (LVS) lost about 50% of its market cap during 1Q 2020 but has since recovered such that it is about 28% off its pre-Covid high. MGM Resorts (MGM) was hit worse, losing about 75% of its market cap at the bottom and currently sitting about 38% below its high. Most companies have suspended payment of their dividends at least temporarily in order to conserve cash. Does the 30% +/- discount offer enough incentive to want to buy in to this sector? Or do you think we are still more than within 30% striking distance of optimal operations for these companies?

Unemployment

In addition to the illness issue, unemployment is another headwind that Las Vegas is facing. Nevada’s unemployment is in the 25% range, the highest in the country. This does not bode well for locals who want to gamble. With the national unemployment rate in the low to mid-teens, and with many still “employed” by the grace of the Paycheck Protection Program, my concern is that there will not be the disposable income out there to go to Las Vegas to gamble and go to shows.

IMO

I might think differently if Las Vegas stocks were still 50% to 75% discounted from their previous highs, but I think this is a sector to avoid. Nothing is forever, and as Las Vegas recovered from the hammering it got after the Financial Crisis 12 years ago, so will it probably eventually recover from today’s issues. I guess if you are a gambler, then go ahead and place a bet on Vegas, but please don’t go all in. Only invest the “disposable income” portion of your portfolio. Even if you are proven correct and Vegas does return in short order, I don’t think the payout for you as an investor is commensurate with the risk that you take by investing in Las Vegas stocks at their present levels.