Friday, March 21, 1997 | 11:59 a.m.
IN NO LESS than seven published columns in 1997, I discussed the remarkable findings of the Las Vegas Investment Advisors' weekly traffic surveys at New York-New York. I did this to alert thoughtful investors about possible opportunities in the stock of Primadonna, an owner of a 50 percent interest in New York-New York. This column, for the last three years, has been about Wall Street's financial interest in Las Vegas and the ever-present potential opportunities and risks of investing in stocks. It is also hopefully about understanding and interpreting trends, including fact, comment, opinion and analysis, not yet fully understood elsewhere.
As the Las Vegas Investment Advisors' surveys indicated that New York-New York was getting stronger and not weaker as common wisdom would indicate, it became apparent that the partners -- MGM Grand and Primadonna -- had developed an asset of very substantial, yet unknown value. The surveys clearly indicated that Wall Street was overlooking what was so obvious. As the weeks passed into months, Las Vegas Investment Advisors and an affiliated company, American Investment Services, published an investment report and buy recommendation on Primadonna written by this columnist when the stock was $19.
Finally, this past week or so, Wall Street has begun to see what was apparent months ago. New York-New York's owners are in contract to close on the purchase of several acres of land just to the north of the property and just to the south of Monte Carlo. This land purchase will lead to some planning on how best to grow New York-New York's business. It will obviously include another tower of upwards of 1,000 rooms and likely more casino and more leased space for businesses that could prosper in New York-New York's crowded streets and Central Park. It will pave the way for far higher levels of revenue and cash flow than Wall Street originally perceived. I am not going to increase my 1997 EBITDA estimate of $130 to $150 million nor am I willing to speculate what may develop as the expansion of New York-New York takes shape. However, thoughtful investors should weigh the history of the Mirage as its creative management expanded its initial product from a revenue level of about $650 million annually initially to today's Mirage-Treasure Island complex that generates nearly twice that much.
My negative columns on the gaming industry, so frequent in the last six months or so, have been an effort on my part to alert investors to shy away from problem areas of gaming investment and not to purchase stocks because they have collapsed in price. These problem areas still persist but they are hardly likely to have any bearing on the outlook for further revenue and cash flow gains at both New York-New York and a host of well-run entertainment superstores.
Several weeks ago, I added up 1997's Las Vegas stock market report card. Two-thirds of our local companies remain in the doldrums (11 of the 40 gaming companies followed by Las Vegas Investment Advisors have declined more than 15 percent in 1997) and, in my opinion, bottom fishing (a Wall Street phrase of buying stocks after major declines) is the poorest of all investment strategies unless one really knows what they're doing. Remember, averaging down, that is, the practice of buying more shares on each successive further dip, is fraught with financial suicide since the last shares purchased in such a strategy will be free -- since the target company is in bankruptcy and the shares worthless. Average up -- never down!
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