Investing

As the Massachusetts gaming commission began hearings last week to decide if the Wynn Co will retain its license to operate the first major urban casino on the East Coast, I thought back to my original introduction to the casino industry in 1983. I considered much that industry has changed, but also how each sector I’ve researched has transformed and why these metamorphoses keep my job fresh.

I met Steve Wynn as he was building the Golden Nugget casino in Atlantic City, the finest structure among its looming Boardwalk neighbors. Thousands of miles away, Las Vegas was reawakening after a scandal-ridden decade. The Strip was so bare that I needed to avoid tumbleweeds rolling down from the hills, as I jogged.

After completing the Mirage, Wynn renamed the company after constructing a lavish masterpiece and followed up with the Bellagio, notable for its Chihuly-flowered ceiling and musical fountains. Within a decade, casino/hotels resembling Venice, Paris, New York, and the Pyramids covered nearly every square inch along the Las Vegas Strip.

Now, 48 states offer legalized casinos in the U.S., and Macau, the Chinese-owned peninsula, is home to the largest concentration of gaming facilities in the world, generating five times the revenue of Las Vegas. Any resemblance to the industry I first covered is purely a function of the consistent rules of slots, blackjack, craps and roulette.

To invest well in the industry today requires, at the very least, an understanding of geographic expansion opportunities and the potential scope of widespread professional sports betting.

I also followed the recently deregulated airline industry, which was struggling for profitability in a world of limitless route and price optionality. New entrants swarmed the air but fares collapsed, costs climbed, and many carriers disappeared over the next decade.

Gone are Eastern, Pan Am, TWA, Braniff, Midway Air, Texas International, and, of course, the Trump Shuttle.

Most that survived the cutthroat 1990’s cratered under the weight of debt and fear of flying following 9/11. The evolution from an elite and expensive travel experience to something closer to flying bus travel has done nothing magical for airline stocks, which have been cyclical and indifferent performers at best.

As Fidelity’s first cable industry analyst, I observed the rise and dominance of a highly capital-intensive industry that soon defined the way Americans watched television and created a new breed of billionaire media moguls. Hundreds of local cable operators emerged, most of which were acquired by Telecommunications Inc and Comcast as they built a pan-national presence.

Now we have come full circle, with the cable operators battling deep-pocketed streaming competitors to preserve their relevance. Having watched the nascent cable companies obliterate the field in the 1990’s was good practice in recognizing how quickly the prevailing players can lose ground.

I followed biotechnology and heath care.

Hundreds of biotech companies came public in the ’90s, billions were raised and evaporated after failed clinical trials, but the successful products, from arthritis to cancer therapy, are among the best selling drugs in the world. I managed among the largest dedicated funds when great drugs emerged for HIV, cancer, schizophrenia, and multiple sclerosis, but I also learned to be wildly skeptical.

Gene editing, or CRISPR, is here, but it’s not yet the great cure-all. Biotechnology investing is an evolving minefield, but if you study the science and really labor over the statistics, there are great opportunities.

During the past two decades, innovation in technology has driven most of the transformation in the way we communicate, work, learn and even date, and has, essentially, driven the stock market. Even before I became a diversified fund manager, I saw one of the greatest tech changes ever with the cellular industry that fit neatly into my broadcast industry duties.

When a colleague announced that he envisioned every person on the planet having a wireless phone, able to talk across continents, I honestly couldn’t believe it. I still consider this as my biggest miscalculation ever as an investor. It taught me to listen, read, and think before dismissing any idea, whether it’s widespread Internet shopping, on-demand car service, zero fee index funds, drilling for oil horizontally, etc.

The market thrives on novelty that’s useful or desirable, and as a career investor, it’s these radical changes across all the sectors that helps keep my job interesting. Now let’s see who ends up owning the Encore Casino a few miles from my home. I’m betting it’s Wynn.

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