Rolling the Dice on MGM Resorts Stock in July: Historically, It’s a Winner

Posted on: June 29, 2019, 04:00h. 

Last updated on: June 29, 2019, 11:16h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

MGM Resorts International (NYSE:MGM) stock surged 12.75 percent in June, beating the S&P 500 by a margin of 2.55-to-1. And if data from years past proves accurate, shares of the Mirage operator could extend their winning ways in July.

The Bellagio is owned by MGM Resorts, a company whose stock has generally performed well in July. (Image: Images by Leonardo)

Over the past decade, MGM Resorts has been one of the best-performing members of the S&P 500 in the seventh month of the year. During those 10 years, MGM stock delivered an average July gain of 6.43 percent, making it the 18th-best member of the S&P 500 during that month, according to Schaeffer’s Investment Research.

MGM’s median return over those 10 July’s was 7.78 percent and its win rate, or the number of times in which the shares generated positive July returns, during that decade was 90 percent, according to Schaeffer’s data.

MGM’s July Fireworks

Across the board, US equities have fared decently in July. Over the past two decades, the S&P 500 averaged a July gain of 0.6 percent, making it the sixth-best month of the year for stocks, on average. Said another way, MGM stock’s typical July gain is more than 10 times of the benchmark US equity gauge.

MGM’s July returns, on average, outpace those offered by the VanEck Vectors Gaming ETF (NYSE:BJK). “ETF” means exchange traded fund, a basket of securities providing exposure to a broad market index or, in BJK’s case, a specific industry.

BJK, the only ETF focusing on casino operators and gaming companies, averages July gains of 4.19 percent, making it the sixth-best US-traded ETF in the seventh month of the year based on past performance. But that trails MGM’s average July showing by more than 220 basis points.

MGM, the largest operator on the Las Vegas Strip, commands a weight of 5.83 percent in BJK, making it the fund’s fifth-largest holding.

Interesting fact: MGM is one of three travel and leisure stocks ranking among the top 25 S&P 500 winners in the month of July, but the Bellagio owner is the only casino name among those 25.

Past Isn’t Always Future

On Wall Street, it is often said that “past performance is not a guarantee of future returns.” Translation: just because MGM stock performed well in a July a few years ago, that doesn’t mean shares will do it again this year.

Year-to-date, MGM shares are up 17.77 percent, putting it ahead of only Las Vegas Sands Corp. (NYSE:LVS) among the four largest US casino operators. Up 74.08 percent year-to-date, Caesars Entertainment Corp. (NASDAQ:CZR) is by far the best-performing name among the big four domestic gaming companies, but much of that has to do with news out last week that Eldorado Resorts, Inc. (NASDAQ:ERI) said it is acquiring Caesars for $17.3 billion.

MGM outpaced the S&P 500 in the first half of 2019 and many analysts remain supportive of the shares as highlighted by an average price target of $33. Recently, Morningstar said its fair value estimate on the Aria and Mandalay Bay operator is $38. The stock closed at $28.57 on Friday.