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Win with Wynn?
03/12/2015 7:00 am EST
Kevin Kennedy, editor of Coolcat Report, selects stocks using a momentum-based strategy, buying shares after they have moved to new highs, corrected, and consolidated, setting up a potential new move up. Here, he looks at a casino operator.
Wynn Resorts (WYNN) operates the Wynn Las Vegas and Encore casino resorts in Las Vegas and Wynn Macau and Encore at Wynn Macau resort located in the People's Republic of China.
The stock has been a strong performer in recent years, but has taken a big hit since topping out last March above $240 a share, falling 43% off that peak and losing ground in nine of the past 12 months heading into March.
The stock then tried to put in a bottom in December, bouncing higher after falling below $133 and eventually getting above $160, but it’s fallen for three straight weeks and closed at $137 Friday.
Declining revenues in Macau have been the main culprit and a nasty spat that led to the company’s board ousting CEO Steve Wynn’s ex-wife Elaine is another distraction. Some analysts see the Macau situation turning around and note that Wynn will open its new Wynn Palace there in 2016.
The stock came public at about $8 on a split-adjusted basis in 2002 and rose in four of its first five years before cratering 62% in 2008.
It closed March 2009 below $14 and tripled from that trough by the end of the year. It then almost doubled the following year, added modest gains in 2011 and 2012, and then jumped another 81% in 2013. It lost 21% last year and is down another 7% this year.
WYNN’s market cap of $13.9 billion values the company at more than 2 1/2 times annual sales of $5.4 billion. Sales have ramped up over the years from about $1 billion in 2003 to more than $5 billion in 2011.
They’ve flattened out a bit since then, but earnings growth has been sharp coming out of the recession, with profits of $7.17 per share in the past four quarters, more or less unchanged, compared to the prior year but well above the $0.17 per share registered in 2009.
The company’s dividend payouts in the past year have yielded more than 4%. My stop is below both the December low and the $130 mark and risks about 5%.
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