Casino Gaming Stocks Best Bet: Monarch Casino Says Wall Street Market-Makers

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Investment Theme

Risk & Reward live in lots of activities. Few enterprises are as boisterous about it as the entertainment business. Wealth-building is for most investors the most important portfolio objective, due to risks of unexpected financial emergencies, planned major expenses, and too-willingly deferred retirement preparations. Life-longevity expansions from bioscience technology advances compound the latter financial inadequacies for many individual investors.

Tight times in loose businesses may draw the attentions of depressed investors, but no matter how bad the market averages seem to get there are always a few stocks showing how good things can be – even now.

We monitor over 4,000 stocks, ETFs, REITs and Indexes every market day to see what the sharks at the derivatives markets of options, futures, swaps, and other exotica are identifying as ways to move some parts of uncertainty into certainty. What level-headed investors are willing to pay for the insurance to make it happen tells how far prices are yet likely to go.

On over half of those issues monitored past history paints periods of rewarding selections with very credible odds. Over two decades of daily watching helps which ones and when to believe what they are saying.

Today’s survey of over 4,000 equities finds hundreds of stocks exercising the Market-Maker [MM] capital liquidity capabilities, some of which, like Monarch Casino & Resort (NASDAQ:MCRI) reveal strong, previously reliable indications of near-term coming capital gain.

Today’s Opportunity Target

Company description:

Monarch Casino & Resort, Inc., through its subsidiaries, owns and operates the Atlantis Casino Resort Spa, a hotel and casino in Reno, Nevada. The company also owns and operates the Monarch Casino Resort Spa Black Hawk in Black Hawk, Colorado. As of December 31, 2021, its Atlantis Casino Resort Spa featured approximately 61,000 square feet of casino space; 818 guest rooms and suites, approximately 1,400 slot and video poker machines; approximately 37 table games, including blackjack, craps, roulette, and others; a race and sports book; a 24-hour live keno lounge; and a poker room. In addition, its Monarch Casino Resort Spa Black Hawk featured approximately 60,000 square feet of casino space; approximately 1,100 slot machines; approximately 40 table games;10 bars and lounges; 4 dining options; 516 guest rooms and suites; banquet and meeting room space and other supporting facilities. The company was founded in 1972 and is based in Reno, Nevada.”

Source: Yahoo Finance

Yahoo Finance

The big picture: Risks vs. Rewards

We grouped MCRI with other similar gaming and resort companies frequently compared by individual investors. Forecasts implied by hedging actions of MMs facilitating volume block trades ordered by big-$ funds provide likely coming-price prospects for comparison. Actual market outcomes for these stocks following prior forecasts with today’s upside-to-downside forecast proportions add perspective to the evaluations.

Figure 1

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The tradeoffs here are between near-term upside price gains (green horizontal scale) seen worth protecting against by Market-makers with short positions in each of the stocks, and the prior actual price drawdowns experienced during holdings of those stocks (red vertical scale). Both scales are of percent change from zero to 25%.

The intersections of those coordinates by the numbered positions are identified by the stock symbols in the blue field to the right. Market-index trade-off norm of S&P 500 Index ETF (SPY) is at location [4], an unusually high level of downside. Our principal interest is in MCRI at [5].

The dotted diagonal line marks the points of equal upside price change forecasts derived from Market-Maker [MM] hedging actions, and from the actual worst-case price drawdowns from positions that could have been taken following prior MM forecasts like today’s.

This map is a good starting point, but it can only cover some of the investment characteristics that often should influence an investor’s choice of where to put his/her capital to work. The table in Figure 3 covers the above considerations and several others.

Principal questions for all alternatives are “how likely are these outcomes to happen,” and “can their impact be improved?”

Figure 2 presents the MMs’ price range forecasts [B] to [C] for the alternative investment candidates in Figure 1, along with the outcomes [ I ] from their prior past 5 years of daily forecasts with the same proportions [G] of today’s up-to-down Range Index [RI] prospects. The numeric value of RI is that percentage of the whole range below the current market price.

Figure 2

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Contributing to that comparison are the demonstrated odds of a profit-successful forecast in column [H], its complement of 100 – H, or loss frequency, size of net gain attained [I] and size of worst loss [F] experienced in prior holding periods, so that, when weighted appropriately in [O] and [P], they produce the Net of [Q]. Respecting the power of compounding, [Q] converted into basis points per day [J] of capital commitment at [R] presents a highly comparable figure of merit (fom) for investing preferences where the dominant objective is to build easily liquidated capital to meet emergency, retirement or other planned needs.

By its use as a ranking, the figure of merit (fom) [R] for each row provides an additional measure of attraction, emphasizing the capital gain potential for MCRI. Since the [H] odds on wins vs. losses and the [J] holding periods impact [R], the size of samples from which past outcomes are drawn need careful scrutiny but are comparable for all types of equity investments.

Note also please the comparison of these stocks with the S&P 500 index-tracking ETF and with the 3203 securities average for which we here compile forecast population specifics. From that population we use the dimensions illustrated in Figure 2 to rank the most promising and historically evidenced few stocks at present, each based on prior MM forecasts with upside-to-downside balances like today’s.

Recent Trends in MCRI Forecasts by Market-Makers

Recent weakness in MCRI stock price approximates much of the equities market. Apparently it has attracted attention among some institutional investment organizations. In the last two days their buy orders have supported increased expectations of coming prices.

The current upside target of $82 offers a prospective gain of +20%, but its current price of $69 is at the low of market professionals’ expectations of from $69 to $83.

Figure 3

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The small “thumbnail” picture at the bottom of Figure 3 shows the frequency of the past 5 years of MCRI daily Range Indexes [RI]. At its present level of 3 (near the forecast low of the range) nearly all of subsequent RIs, and their prices, clearly have been higher. In the past there have been 19 out of the 1261 daily forecasts with RIs of 3.

All but two of the 19 have reached their top-of-range forecasts. The historic odds of reaching past targets has been 89 out of 100. And their average payoffs, net of those 2 was +15% in 37 market days (7 weeks) of capital commitment to the venture – an over 170% a year rate. No guarantees, just good odds for a big payoff rate by being an active investor.

Conclusion

Comparison of Monarch Casino & Resort with its industry competitors makes it a good choice for most likely desirable industry near-term capital gain vehicle at this point in time.