Gambling Stocks Up by 35 Percent on Wall Street This Year

The Dow Jones U.S. Gambling Index this year has surged more than 35 percent, easily outpacing the broader market as represented by the Standard & Poor's 500 index, which has added 12 percent.

After rising during the first four months of the year, the index gave back much of the gain amid economic concerns this summer.
"Those concerns didn't come to fruition," said Robert LaFleur, a gaming industry analyst with Susquehanna Financial Group. "Expectations were that higher gas prices and a softening housing market would pressure the industry, but visitation has remained strong."

Comprising 67 stocks weighted primarily toward large casino operators such as Harrah's Entertainment and MGM Mirage, the Gambling Index, in he past, has tracked sentiment on the overall economy.

Continued Increase

"The Las Vegas strip market is driven more by overall economic growth," said Sumit Desai, an equities analyst at Morningstar, based in Chicago.  "The stocks are more cyclical than the underlying business."
There's more good news. Gamblers don't curb spending in economic slowdowns. "The high-roller business is always going to be strong because these guys don't worry about short-term factors," said LaFleur.

There was more good news earlier this week when another leading economic indicator inched a bit higher, suggesting the recent housing slump was not enough to offset lower gas prices and a rising stock market, and thus negatively impact the economy.
Another boost for the sector, said Frank Fahrenkopf, head of the industry trade group, American Gaming Association, and a former head of the Republican National Committee, is casino operators' expansion into other businesses.

Total Package

"The industry has moved to the total entertainment package," Fahrenkopf said. "People come to destination resorts. They come to shop, to see shows and to play golf."

That trend in Las Vegas entices more families to what was long considered a bachelor's paradise.
According to statistics from the American Gaming Association, it used to be that a casino's bottom line was about 65 percent gaming revenue. That's down to around 40 percent now at some companies, even as gaming revenue surged past $30 billion for the first time last year.

Driving the expansion in Las Vegas and Atlantic City, N.J., and also in the numerous other states that license American Indian casinos, is the increased social acceptance of gambling, Fahrenkopf said.
Now 48 states have some form of legalized gambling, from lotteries to horse racing to casinos, he said.

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Seventy Million Online Gamblers

But the surge that benefited casinos most came as poker soared in popularity, first through Internet sites. 
The Poker Players Alliance, a player-based lobbying group, guesses there are more than 70 million Americans who play poker online. The number of poker tables in Las Vegas has risen to 405 in 2005 from 142 in 2003.

Las Vegas Sands Corp., run by billionaire Sheldon Adelson, and Wynn Resorts Ltd., run by Steve Wynn, have licenses to operate in Macau, China, the former Portuguese colony on the Chinese mainland that is now considered the next gambling haven.

"The market trends are very strong in Asia and there are no indigenous companies with the experience to operate on the scale they want in Macau," LaFleur said.  "Singapore is also a growing market for U.S. casinos."


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