Thursday, June 4, 2015

What will it be – profits or ethics?

These are direct lines from the 1995 movie - Casino

Ace Rothstein: [narrating] The town will never be the same. After the Tangiers, the big corporations took it all over. Today it looks like Disneyland. And while the kids play cardboard pirates, Mommy and Daddy drop the house payments and Junior's college money on the poker slots.

Ace Rothstein: [voice-over] In the casino, the cardinal rule is to keep them playing and to keep them coming back. The longer they play, the more they lose, and in the end, we get it all.

Well as investors we have choices – we could buy “sin stocks” such as the booze and tobacco stocks or we could own the shares of casino stocks such as Caesars (CZR), Las Vegas Sands (LVS) or Wynn Resorts (WYNN) and so on – but most of them have been losers – probably because they have high cost physical locations.

The on-line gaming stocks get around the physical location problem – all the customer needs is a smart phone and a credit card. On example among the many TSX listed gaming stocks is Amaya Inc. who on June 1 , 2015 confirmed that its top two executives are named in an investigation by Quebec’s security regulators relating to trading activity of the company’s stock ahead of the $4.9 billion PokerStars takeover in June 2014.

Seems appropriate to quote source on analyst Benj Gallander - BNN’s Market Call March 26, 2015 “When you deal with the gaming sector, there are some people that can be less savory than others”

To me the acid test is to decide if the customers of an enterprise enjoy a benefit from the product or service of said enterprise. Do the most buyers of Ford offerings enjoy a benefit? Do most customers of Scotia Bank services enjoy a benefit? Do most travelers using Air Canada enjoy a benefit? You know what I mean.

So as an investor ask yourself – do most “users” of on-line gaming platforms enjoy a benefit? Personally I think not – so as a potential investor – I am out.

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