There’s no question that 2017 was a big year for Vancouver-based Great Canadian Gaming Corp. (TSX:GC), both for the company and its stock.
The company made a number of deals that will grow its gaming revenues considerably. On the stock front, it generated a 35% total return for shareholders, the fourth year that it generated over 30% out of the last five years.
Naturally, investors are thrilled with its five-year annualized return of 29%; the most recent announcement in December that it is partnering with Clairvest Group Inc. (TSX:CVG) — one of my favourite stocks on the TSX — to modernize and operate four casinos and racetracks outside Toronto could be just the catalyst to drive its stock into the $40s.
Note that I said, “could be” just the catalyst. There’s no such thing as a sure thing in life. That said, I’ve been a fan of Great Canadian Gaming and its CEO Rod Baker for some time; there simply aren’t many companies as well run that also deliver for shareholders.
Great Canadian Gaming’s great, but …
Oh, it’s great. There’s no question of that.
However, the money laundering scandal at its River Rock Casino in B.C. isn’t shining a favourable light on the company at the moment. The casino’s director of VIP gambler relations has had their registration revoked as a result of violations of the province’s anti-money laundering regulations.
Casinos are a heavily-regulated business, so it’s only natural that flags are raised from time to time. From a positive standpoint, it does provide a wide moat for Great Canadian Gaming because it’s so difficult a business to enter.
Moving away from the regulatory aspect of Great Canadian Gaming’s business, I saw a piece by Bloomberg in The Globe and Mail recently, which echoed my sentiment that the TSX isn’t all it’s cracked up to be.
Canaccord Genuity Group Inc. market strategist Martin Roberge was explaining why the TSX has underperformed so badly.
“On a forward price-to-earnings basis, Canada’s stock benchmark is at the cheapest relative to the S&P 500 Index since the financial crisis,” stated Bloomberg. “But Mr. Roberge suggests looking at the ratio of enterprise value, or market capitalization plus debt, to sales. By that metric, U.S. stocks are actually slightly cheaper than their Canadian counterparts.”
Canadian investors ought to cast a wider net because there are better places to invest in almost every sector.
Great Canadian Gaming might be good, but in my opinion, Churchill Downs, Inc. (NASDAQ:CHDN) is better — and not just because it’s based in the U.S.
The home of the Kentucky Derby
When most people think of Churchill Downs, they think of Mint Juleps and the first leg in horse racing’s Triple Crown.
However, years ago, Churchill Downs diversified into gambling, which has turned into a gold mine for the company — so much so that its shareholders have achieved a five-year annualized total return of 30%, about 100 basis points higher than Great Canadian Gaming.
The company’s trio of revenue streams: racing, casinos, and Twin Spires, its online horse betting platform, are all growing their top- and bottom-line.
Delivering consistent, if not spectacular growth, CHDN stock hasn’t had a down year since 2009.
Oh, and it doesn’t hurt to own one of the most popular sporting events in North America.
