Insider Activity: MGM Resorts International (MGM)

Fund manager makes big buy after merger announcement in the sector.

  • Special: Wall Street Buying Frenzy on Under $5 Stock
  • Money manager Keith Meister continues to be bullish at MGM Resorts International (MGM), the casino firm where he already owns 20 million shares and has a board seat as a director.

    On Tuesday, Meister picked up 380,651 additional shares, at a cost of about $10.59 million. This news comes after a big announced merger in the gaming space between Eldorado Resorts and Casears Entertainment.

    Typically, casinos can be a bit volatile, as many folks scale back plans to gamble during times of economic stress. And while gaming revenue has been off in recent quarters, there remains a core group of gamblers that ensures the casinos stay profitable.

    However, casinos can also get into trouble due to their leverage. Caesars has nearly $3 in debt for every $1 in equity. MGM has about $1 in debt for every $1 in equity. Even with Eldorado acquiring both Caesars and its debt, MGM will be in a far better financial situation should gaming revenues slow further.

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  • Action to take: We still like the casino space for its attractive value, and MGM Resorts has a good ratio of debt to equity, particularly compared to Caesars Entertainment. Trading at just 17 times forward earnings, MGM looks like one of the better buys in the space here, even if the company is less likely to get a buyout offer than other players in the space. Consider picking up shares under $30.