Gaming industry hoping Congress will offer help
Casino companies are finally starting to see online gaming as a possible growth engine for the industry and are talking with members of Congress about four different bills floating through the House and Senate. The November elections may result in a more conservative Congress, less friendly to legalizing online gambling, so now is the time for action.
This is a big deal for the industry. With Las Vegas struggling and companies wrestling with high debt levels, online gaming is an especially appealing opportunity, with low start-up costs, high margins and high growth potential. It’s everything a company dreams of.
The real winners could be operators with lots of variety. Harrah’s and MGM Resorts have more than a dozen properties scattered throughout the country. A range of rewards, which is a major differentiator in online gaming, could be offered, bringing gamblers into both the online and brick-and-mortar casinos.
Smaller operators may also benefit. Some online players have no interest in Las Vegas-located perks, and Boyd Gaming and Ameristar Casinos both have casinos throughout the country. Local perks that Las Vegas Sands or Wynn Resorts can’t offer in Las Vegas could attract online players in these other markets.
Keep an eye on the progress of online gaming bills in Congress. This could be a big win for the casino industry if it gets the legislation right.
Ask the Fool
Q: What are trading curbs? – S.B., Fort Wayne, Ind.
A: Trading curbs on program trading were instituted by the New York Stock Exchange after the crash of 1987 to temporarily restrict all or some trading during periods of volatility.
Program trading was blamed, at least in part, for the crash of 1987. It features high-volume trades typically made by institutional investors using computers. These may be programmed, for example, to execute big trades if certain securities rise or fall to certain levels.
These curbs were discontinued in 2007, as many deemed them ineffective. But after this past May’s one-day “flash crash,” curbs of various kinds are being re-examined.
A powerful kind of curb still around are “circuit breakers,” which halt trading entirely for an hour, two hours or the rest of the day, whenever the Dow Jones industrial average drops, respectively, by 10 percent, 20 percent or 30 percent. A new rule will curb trading temporarily for major stocks that surge or plunge by 10 percent or more in short order.
Q: I saw a profit of $2.35 per “diluted” share in an earnings report. What’s a diluted share? – K.T., Las Cruces, N.M.
A: A company’s bottom-line profit, or “net income,” is divided by its number of shares to arrive at its earnings per share (EPS). This may be reported in two ways, as “basic” and “diluted.” The basic number of shares are those that currently exist, while the diluted share count is more conservative, taking into account shares that COULD exist – due to people exercising existing stock options, for example. Other securities that could be converted into common stock are also accounted for. It’s usually best to focus on diluted numbers.
Investment is always with risk. I have the most regret for having sold my stock when the market was very low, in March 2009. I lost my guts. – G.M.D., online
The Fool responds: Guts are critical to portfolio performance. It’s dangerously easy to get caught up in a panicking crowd and sell your holdings rashly, or to just keep buying as the market climbs, not asking yourself whether what you’re buying may be overpriced.
The best investors are disciplined. They know what they believe, and they stick to their principles, no matter what the market is doing. If you believe the market will keep rising over many decades, don’t let a sharp downturn throw you. (That’s often a great time to buy more.) If you believe that slow-and-steady dividend payers will make you rich in the long run, don’t let your head get turned by fast-moving stocks without sustainable competitive strengths.
You sold when the market had fallen about 40 percent in a year. Since then, it’s risen about 40 percent. Reading and learning more about investing can help build your confidence.