FANTINI’ S FINANCE
Look to the Leaders
How to deal with government-induced uncertainty in the stock market and its likely effect on gaming
BY FRANK FANTINI
If there is one word that sums up investor sentiment today, it is uncertainty. Following close behind is its lexiconic cousin, anxiety. Most of that uncertainty can be traced to 1600 Pennsylvania Avenue, where President Donald Trump seems to govern by bluster, and symbolized by his chainsaw-wielding sidekick Elon Musk.
This isn’ t to say Trump’ s proposals are right or wrong, or that he won’ t be successful. But for now, the prospects are for a stock market that is at least rattled.
Feeding this apprehension are signs of an economic slowdown and Trump himself warning of short-term disruptions from policies such as higher tariffs.
Importantly for gaming, consumer confidence is falling. The most recent University of Michigan survey showed consumer confidence plunging with the long-range expectation index at its lowest since November 2023.
The implications are clear. People without jobs or fearful for them don’ t spend money in casinos. Companies cutting costs send fewer employees to trade shows and conventions. Casino operators don’ t spend as much on games and associated technology and equipment. International travelers are less likely to visit Las Vegas— especially perhaps Canadians and Mexicans, who comprise the largest chunks of visitors.
In such an uncertain environment, it serves stock investors to own a few stalwarts that might not dazzle during bull runs, but that provide some safety from bear attacks.
Readers of this space will not be surprised that we consider two such stalwarts to be the gaming REITs, Gaming and Leisure Properties and VICI Properties. Trading around 12 times next year’ s adjusted funds from operations, they are not highflyers begging to crash. In fact, their valuations can be said to be low and the stock prices ought to be higher.
Further, their rents are rock solid if the experience of the worst of the 2020 Covid panic is an indication. It probably would take something like repeats of the 1929 stock market crash and subsequent Great Depression to shake their financial underpinnings.
The REITs also have paths to steady growth in scheduled rent increases and in their ability to finance tenant property expansions.
They also have growth strategies beyond more of the same. For VICI, it is reaching into what they call experiential properties, from golf courses to family resorts to wellness retreats to luxury hotels. For Gaming & Leisure Properties, it is trying to extend into tribal growth projects.
And, while the transaction market among public companies has been slow, both companies report considerable interest among owners of privately held properties.
Meanwhile, VICI and Gaming & Leisure pay dividends yielding 5.3 percent and 6.1 percent, respectively. That itself is some comfort in an era of inflation and uncertainty.
Wonder from Down Under And all that glitters may be gold.
If there are rays of light, it may come from two Aussie-managed game companies that combine both vision and execution— Light & Wonder and Aristocrat.
Both companies continue to report strong earnings, growing businesses and the financial strength that allows them to capitalize on opportunities and reward shareholders. The most recent example from Light & Wonder came from its announcement that it will buy Grover Gaming for up to $ 1.05 billion, including potential earn-out.
Grover has potential beyond its current markets, given that it serves only five of 11 charitable electronic pull tab jurisdictions. But the real potential might be in what the move says for other possible deals in unconventional forms of gaming.
As sweepstakes, pull-tabs, skill-based and similar games proliferate, and eventually are legalized and taxed, owners of the pioneering companies will want to cash out, and mainstream game companies like Light & Wonder will be there to capture the opportunities.
In a different sort of twist, Light & Wonder Executive Chairman Jamie Odell suggested the company may change its primary stock listing from New York to Australia. The company’ s investor base is already 30 percent Australian, since it established a secondary listing there.
The reason to move is simple: Australian investors accord gaming stocks higher valuations than their dour American counterparts, so why beat your head trying to knock sense into American investors when there’ s a universe of more bullish types elsewhere?
In less dramatic fashion, Aristocrat recently completed a strategic review in which it decided to fully focus on its meat-and-potatoes business— gambling and related gaming.
The interesting thing about Aristocrat’ s study is that, unlike those initiated by so many companies, it was launched not at a time of worry, but while enjoying a position of strength as the world’ s games and associated equipment leader.
As Warren Buffet has so famously demonstrated, the way to the greatest long-term returns is to invest in those companies that are industry leaders for a reason.
Aristocrat and Light & Wonder have had strong runs for a long time now. Aristocrat stock is up 3.4 times since Trevor Croker became CEO and chairman in 2017. Light & Wonder, once buried under a mountain of debt, is now a tower of strength and its stock has more than tripled since Jamie Odell became chairman in September 2019.( Worth noting that Aristocrat began its turnaround under Odell’ s leadership, too.)
Large portions of the gaming industry, such as U. S. regional brick-and-mortar, are mature, and there is a tendency to bearishly focus on them. But overall and globally, gaming has enormous growth potential. Using the Warren Buffet approach, Aristocrat and Light & Wonder appear to still have considerable move to run up.
Frank Fantini is principal at Fantini Advisors, investors and consultants with a focus on gaming.
12 Global Gaming Business APRIL 2025