3 reasons why Penn National Gaming is a good long-term game

<p>Although most investments have suffered steep losses during this new coronavirus pandemic, very few have experienced the wild volatility of Penn National Gaming (NASDAQ: PENN). At one point, the PENN share had bled over 82% of its value. But since the $ 4.52 bottom ended on March 18, the stock has recovered more than 200%.

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Still, I fully understand the hesitation to invest in a name like PENN shares. With exposure to casinos and sports betting, Penn National Gaming is a type of organization that performs well in bull markets. But in this black swan event where millions of people lose their jobs, it just does not generate much trust.

In addition, the health crisis naturally has people avoiding each other. Of course, this dynamic is particularly painful for the casino and sports betting industry. It is a sector that thrives on the energy of large crowds. But this is exactly what state and federal authorities have warned their voters against. Therefore, you could not have a worse situation for Penn National.

It is obvious that we are facing a market and economic background that has great uncertainty. When people do not know if they can pay their bills next month, gambling is the last thing on their mind. Thus, I expect some wild trading for the PENN share.

Still, if you’re a risk tolerant counterpart, you want to keep an eye on Penn National Gaming stocks. Here are three reasons why:

Gambling resilience should support PENN shares

During a crisis, most families end up financially. Gone are the extravagances like stylish vacations. Instead, people focus on the essentials, which is why stocks like Kroger (NYSE: KR) and Clorox (NYSE: CLX) have performed relatively well. But PENN stock? Again, gambling right now is probably the fastest way for married people to see divorce papers.

Still, if Las Vegas visitor volume statistics are anything to go by, investors should realize one thing: the gaming industry is surprisingly robust.

In this chart, I compare Sin City visitors – taken from the Las Vegas Convention and Visitors Authority – to recessions from 1970 to 2019. First, annual tourism growth averaged 3.9% during this period, which included several recessions. .

Second and more importantly, when a recession occurs, the impact on Vegas tourism is limited. For example, the volume of visitors accelerated during the economic downturns of the early 1970s and early 1990s. And in other cases, the recession weakened for just a few years.

Granted, each decline is different. But even if the coronavirus significantly disrupts the economy, history shows that Las Vegas always attracts people. I expect a similar return to normalcy in the other regions where Penn National Gaming operates.

Keep economic devastation in perspective

In the last three weeks, nearly 17 million Americans have applied for unemployment benefits. If it was not bad enough, the real figure could be much worse. Across the country, the unemployed have suddenly exceeded their states’ benefit programs.

That is completely understandable. No one foresaw such a catastrophic wave of labor market implications.

At the same time, we can not let headline numbers scare us into apocalyptic terms. Primarily, job losses are concentrated in direct coronavirus-affected sectors and low-skilled work. According to the US Bureau of Labor Statistics Summary of the employment situation, about two-thirds of the non-farm wages lost in March (-701,000) are centered in the leisure and hospitality industry.

Of course you can expect this! After all, travel and vacations are the last agenda for any rational person right now. In fact, you can find people who are willing to pay money not to go on vacation.

Do not misunderstand the point: I do not diminish the enormous pain that being fired (and unexpectedly) gives. However, the target group that will drive the PENN share higher is better isolated from this decline than most.

Keep in mind that people who earned between $ 60,000 and $ 79,999 in 2014 represented the largest demographic of visitors to Las Vegas. In 2018, those who earned $ 100,000 or more took the top spot for a mile.

Simply put, the rich have recently strengthened the PENN share and they are the ones least affected by this decline.

Return of Demand

Finally, let’s talk about something we can all agree on: forcing quarantine to stink. As social beings, we must interact with each other.

When we go back to Las Vegas visitor statistics, it is clear that the human element in the gaming industry is still an important selling point. Sure, nowadays you can play from your own home, but it’s not the same.

After perhaps several months of protection on site, you can expect an explosion of gaming activity due to estimated demand.

In addition, all sports leagues have been put on hold, which has apparently shrunk PENN shares in the meantime. However, this circumstance will not be a permanent affair. Once we have our national distractions back on TV, demand in quarantine should recover sharply.

Matthew McCall left Wall Street to actually help investors – by getting them into the world’s biggest, most revolutionary trends FOR anyone else. The power of being “first” gave Matt readers the chance to bank + 2,438% in Stamps.com (STMP), + 1,523% in Ulta Beauty (ULTA) and + 1,044% in Tesla (TSLA), just to name a few . Click here to see what Matt has up his sleeve now. Matt does not directly own the above-mentioned securities.