Thursday, 27 April 2017

Canadian Gambling stocks

Gambling is good business.  People go without pressure around the world into casinos everyday knowing full well that every bet they make, the house has a mathematical advantage over you, it's true, we all know that.  Yet we all have bet some money hoping beyond hope that we can be one of the lucky ones.

That compelling urge of millions of regular people giving away their money to gambling establishments gives me the argument, why can't I be on the other side raking in the money?  Well with these 3 Canadian stocks listed on the TSX, you can be.

Without further fanfare, I give you:

Amaya Inc  (TSX:AYA)

Amaya does not operate any physical casinos or any buildings you can go into.  They own PokerStars and Full Tilt Poker, which when combined together is the dominant player in this market share of online poker.

Now there was a lot of press regarding the insider trading scandal with former CEO David Baazov being charged and the trail is still going on but now that Baazov has officially left the company, things can move forward.

The good news is that in 2016, Amaya generated $355 Million in free cash flow which will be applied against their debt.  If everything continues as is in terms of budgeted cash flow, their debt will be paid off in a few years.

Another interesting thing about Amaya is that it collects most of its revenue in Euros while reporting in U.S. dollars. Currently the Euro is at about a 5 year low thanks for the Brexit vote against the U.S. dollar so if the Euro strengths against the U.S. Dollar, Amaya's position will improve without doing much, similar to an improved currency exchange.

Amaya does not pay a dividend.

Gamehost  (TSX: GH)

Gamehost owns 3 physical casinos in Alberta and it has been tough the last few years for them as Alberta's economy has been hit and with the most recent Fort McMurray wildfire, they had to shut down one of their properties for a while.

But as the greatest investor of all time, Warren Buffet says "buy when there is blood on the street".  Well in this case, its wildfires in the street and once again, consider the URGE factor for gamblers, it continues despite outside influences.

Gamehost currently trades at a 15 times their earnings.  The classic P/E ration screening test.  This gives it a very attractive valuation.  Also GH pays a very healthy dividend, currently a yield of 5.75% monthly.  How about that, on top of having the house advantage on every bet, you get a monthly dividend.

As Alberta's economy improves, there is always chances for dividend increases.

Great Canadian Gaming (TSX:GC)

GC is Canada's largest publicly traded casino operator.  It has 20 casinos and racetracks in British Columbia, Ontario, Nova Scotia, New Brunswick, and Washington State.

The company has done well in the last few years, with net income in 2016 of $75 million.  GC does not pay a dividend but uses its profits to open new locations and upgrade existing establishments.  It also has a buyback program, buying back more than 6 million shares or close to 10% of is total shares in 2016.


Canada has a few interesting choices in gambling stocks and I have outlined 3 of them above.  I am all for diversifying but the general consensus in Canada is to buy banks, utilities, oil stocks, etc.  I give an option to expand your portfolio to include gambling stocks much like how I encouraged Food stocks in a previous posts.  It's your money and you can diversify just like the experts by doing your homework and picking what you feel works for you.  That being said, any one of the above gambling stocks would look good in any portfolio.