Gambling stocks are smart pick despite economic concerns

The economy is in a state of flux, and this is reflected by the Consumer Discretionary Select Sector Index, which posted a drop in the overall stocks by at least 25%. Despite the headwinds, publicly-trading gambling stocks are the safe havens that investors could still rely upon.

The casino industry was buffeted by the pandemic, but Bank of America analyst Shaun Kelley feels confident that, because of how simple gambling stocks are, they offer specific advantages to investors. The sector is consolidating, and it has just gone through one of its worst downturns.

No company went bankrupt, and losses have been rapidly falling with revenue going up. What this means, Kelley argues, is that gaming stocks continue to be a desirable investment, at least in the context of other discretionary segments. Even retailers seem to be falling behind.

It’s not that only bankers believe in gambling stocks – established gambling companies have launched several buyback programs, hoping to continue clawing back shares, which will in turn make important decisions (such as sale-offs or mergers a much easier affair to begin with).

Kelley is confident that companies have had an important lesson to learn during the pandemic, but it has all paid off. Most casino resorts and companies from the sector were able to optimize segments related and not related to gambling.

A drop in workforce was noted, Kelley said, with 27% less staff on average. More importantly, though, casinos began realizing that aggressive marketing would not do, and they have clipped their wings in that regard.

Kelley then went on to urge consumers to keep several gambling stocks on their list for further exploration. He named Penn National Gaming, Boyd Gaming, and Caesars Entertainment as some of the viable options here. But Kelley is also aware that should a recession strike this will have implications for gambling stocks just as well.

Reduced consumer purchasing power is one of the fears that casinos must fear as visitors may stop coming and tourism may subside. Even though inflation rates are not yet telling of a recession around the corner, economists know that the chances of one being averted are indeed very slim.

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