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Betting on Casinos

It was 2009 and armageddon in the marketplace.  Millions of Americans were losing their jobs and/or going through the foreclosure process.  Businesses like Washington Mutual, Lehman Brothers, and incidentally, Trump’s casino group were filing for bankruptcy.    

One of the worst performing companies in the market during this time unsurprisingly was a casino company based in Las Vegas. 

Besides reduced visitation to Vegas and lower consumer spend, “debt” was a dirty word and this company had a lot of it.  People feared companies with lots of debt — “leverage” to the market was a ticking time bomb and the stock price of this company reflected this fear, falling over 95% from its 2008 highs to less than $2 a share in its 2009 lows.  Even President Obama had just finished railing against Vegas casinos and its profligate culture as out-of-touch with the rest of country’s economic woes.

The market believed this company should go bankrupt.

LVS During Crisis Chart

But they were wrong.  

Despite negative headlines, an overwrought concern over the company’s debt, and an economic recession, the company had many things going for it.

Many of its properties were in Asia where visitation to casinos and the regional economy was booming.  Despite a large debt burden, the company’s revenues, and profits were growing — substantially.  The founder and CEO had so much faith in the company that he used over $1bn of his personal net worth to strengthen the company’s balance sheet and lapped up $300mm in shares at the stock’s low.  

Within 7 months the company had grown over 10x.

LVS Post Crisis Chart

During this time I was a college student who was looking for a way to make money efficiently and to learn how to invest.  I tried telling others (about 20 friends and family) about my thesis on the company, leading with the fact that “I’m just a college student with zero experience in investing who disagrees with the newspapers and the ivy-educated Wall Street Analysts” and for some reason, none of the adults that I spoke with was interested in buying the company’s stock.

My roommate and I invested all we could in Las Vegas Sands (I didn’t buy books that semester) and within a year and a half I saw a 20x return on my investment by buying options.

I’m starting this blog because I feel I have come a long way since being a 20-something college student with zero experience in value investing, and I want to share what I’ve learned and hopefully help you earn money with me.  I also hope that we can learn from the experience of some close friends that I admire who may be guest writers or partners in this blog.

Soon, we will share some of the investment ideas and thought processes we have — including why we invest the way we invest and what we hope to do with our funds as we grow them.  We will include companies we’ve invested in in the past, companies we’re currently invested in, and companies that we are considering investing in or are on our radars.

Join us as we look forward to starting a fiercely honest, principled, and collaborative online investment and savings community here on Cents and Sense.  We look forward to your questions, comments and suggestions.  

 

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