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Why Kirk Kerkorian Is Important to MGM Resorts
The Motley Fool
March 15, 2013
By Travis Hoium
News yesterday that Kirk Kerkorian has intentions to raise his stake
in MGM Resorts (NYSE: MGM ) isn't something investors should sweep
under the rug before remembering what he has meant to the company over
the years.
Kerkorian isn't as well known as Steve Wynn of Wynn Resorts, or
Sheldon Adelson of Las Vegas Sands, but he has played a similar
visionary roll in MGM's history.
Kerkorian began his dealings in Las Vegas in 1962 when he bought the
land that Caesars Entertainment's (NASDAQ: CZR ) flagship casino
Caesars Palace sits on. When he sold the land to the company, he ended
up building MGM Grand, and naming it after the MGM movie studio, which
he also owned. Decades later, Kerkorian was behind the merger of MGM
and Mirage, which was the company Steve Wynn built, bringing the
Mirage, Bellagio, and Treasure Island into MGM.
If Kerkorian wants to increase his 18.6% stake in the company, he must
be bullish on both Las Vegas and the economy as a whole.
Bullish on economy
Kerkorian last tried to up his stake in MGM in 2006 when the economy
and markets were going bonkers. After the financial collapse, he
backed off MGM, but now that he's on board, I think it's a strong sign
that one of Las Vegas' biggest investors is bullish on the economy as
a whole and, therefore, Las Vegas.
Kerkorian also has seats on the board, meaning he has insider access
to MGM's financials. Insider buying is often a very bullish sign for a
stock, because insiders know things about a company's operation that
goes beyond what outside investors can know.
What this means for gaming stocks
Before you go out and buy a basket of gaming stocks, it's important to
understand the difference between MGM and other companies. Wynn and
Las Vegas Sands are Asian-centric so, if Kerkorian is bullish on MGM,
it doesn't really mean anything for them. Caesars is in a similar
position to MGM with high exposure to Las Vegas, but instead of having
exposure to Macau, like MGM does, it has exposure to regional gaming
in the U.S. If you're bullish on Las Vegas, MGM is the way to go, not
Caesars.
A deep dive into MGM Resorts
When MGM Resorts began constructing the CityCenter in Las Vegas, it
was an audacious plan that seemed like a sure bet with its prime
location in the center of The Strip. But Las Vegas hit a rough patch
during the Great Recession and has yet to fully recover, so MGM has
since turned its attention to a new market in Macau. This Chinese
gaming enclave now holds the key to the company's future, and a new
resort on Cotai may relieve the company from crushing debt. For expert
analysis on whether this former high-flying stock can regain its form
on the back of a growing presence in Asia, you're invited to check out
The Motley Fool's new premium report on MGM Resorts.
Fool contributor Travis Hoium owns shares of Wynn Resorts, Limited.
You can follow Travis on Twitter at @FlushDrawFool, check out his
personal stock holdings or follow his CAPS picks at TMFFlushDraw. The
Motley Fool has no position in any of the stocks mentioned.
The Motley Fool
March 15, 2013
By Travis Hoium
News yesterday that Kirk Kerkorian has intentions to raise his stake
in MGM Resorts (NYSE: MGM ) isn't something investors should sweep
under the rug before remembering what he has meant to the company over
the years.
Kerkorian isn't as well known as Steve Wynn of Wynn Resorts, or
Sheldon Adelson of Las Vegas Sands, but he has played a similar
visionary roll in MGM's history.
Kerkorian began his dealings in Las Vegas in 1962 when he bought the
land that Caesars Entertainment's (NASDAQ: CZR ) flagship casino
Caesars Palace sits on. When he sold the land to the company, he ended
up building MGM Grand, and naming it after the MGM movie studio, which
he also owned. Decades later, Kerkorian was behind the merger of MGM
and Mirage, which was the company Steve Wynn built, bringing the
Mirage, Bellagio, and Treasure Island into MGM.
If Kerkorian wants to increase his 18.6% stake in the company, he must
be bullish on both Las Vegas and the economy as a whole.
Bullish on economy
Kerkorian last tried to up his stake in MGM in 2006 when the economy
and markets were going bonkers. After the financial collapse, he
backed off MGM, but now that he's on board, I think it's a strong sign
that one of Las Vegas' biggest investors is bullish on the economy as
a whole and, therefore, Las Vegas.
Kerkorian also has seats on the board, meaning he has insider access
to MGM's financials. Insider buying is often a very bullish sign for a
stock, because insiders know things about a company's operation that
goes beyond what outside investors can know.
What this means for gaming stocks
Before you go out and buy a basket of gaming stocks, it's important to
understand the difference between MGM and other companies. Wynn and
Las Vegas Sands are Asian-centric so, if Kerkorian is bullish on MGM,
it doesn't really mean anything for them. Caesars is in a similar
position to MGM with high exposure to Las Vegas, but instead of having
exposure to Macau, like MGM does, it has exposure to regional gaming
in the U.S. If you're bullish on Las Vegas, MGM is the way to go, not
Caesars.
A deep dive into MGM Resorts
When MGM Resorts began constructing the CityCenter in Las Vegas, it
was an audacious plan that seemed like a sure bet with its prime
location in the center of The Strip. But Las Vegas hit a rough patch
during the Great Recession and has yet to fully recover, so MGM has
since turned its attention to a new market in Macau. This Chinese
gaming enclave now holds the key to the company's future, and a new
resort on Cotai may relieve the company from crushing debt. For expert
analysis on whether this former high-flying stock can regain its form
on the back of a growing presence in Asia, you're invited to check out
The Motley Fool's new premium report on MGM Resorts.
Fool contributor Travis Hoium owns shares of Wynn Resorts, Limited.
You can follow Travis on Twitter at @FlushDrawFool, check out his
personal stock holdings or follow his CAPS picks at TMFFlushDraw. The
Motley Fool has no position in any of the stocks mentioned.