Vegas is hurting a little more than most of the country. Your linked article (and most of the others I've read) have a foreboding tone but the figures are not down much for the healthy companies. My research shows they are not projected to get much worse unless the economy really tanks (not just talking about the zero growth we have and the talking heads think is so horrible).
Most of the pain in Vegas is due to real estate there getting overheated along with a badly timed expansion cycle (which will take care of itself as the article points out many projects have been postponed/abandoned). Oil will continue to pull back but probably not even to $100, then it will continue on the march upwards (fast or slow, doesn't really matter). Food and many commodities will get more expensive. We are competing for these things with a developing world that is now consuming right along with us at an accelerating rate (just like America did except the pace is accelerated). We won't like it but we will adjust by buying smaller houses and cars if necessary. The relevant thing here is we will not cease to entertain ourselves (that would be asking way too much of middle class and affluent Americans). So some won't have a much to spend but most of the folks who built Vegas will.
It also helps to keep in mind that this pick isn't a trade. BOYD is well into the lower half of the historical PE. It has experienced management who have lived though this environment before, it has a strong sheet, in short the company will weather all but the worst storms. I was asked via email and have zero idea if this is the bottom for the stock or the sector. Picking bottoms is not possible IMO. The lower twenty percent is even sometimes hard to pick (since some sectors/companies never or take forever to recover. For gaming it might be a year, might be two, but (and as I mentioned if the economy doesn't completely tank) the stock price of the better gaming stocks will lead most sectors, and will rise significantly from current levels (and probably double within two years). That is the bet being made here.
And about the economy taking a pill, if you believe that is the future it would be best to avoid equities entirely (as there are much higher returns to be had in other vehicles for the negative growth economic scenario).
$11.12 (07/23/08)
