Historically speaking, February isn’t a great time for stocks as the S&P 500 averages a 0.30 percent decline in the second month of the year, but MGM Resorts International (NYSE:MGM) is one of the individual names investors may want to steer clear of.
Sparked by fears of the coronavirus, shares of MGM slid 6.64 percent last month. The company’s MGM China unit is one of six concessionaires in Macau. The Gaming Inspection and Coordination Bureau (DICJ) said January gross gaming revenue there tumbled 11.3 percent last month as visits plunged nearly 80 percent in the days following the first reported instance (Jan. 22) of the respiratory illness on the peninsula.
Things won’t get easier for the casino stock in February,” according to Schaeffer’s Investment Research. “That’s because MGM showed up on a list of the worst S&P 500 stocks to own in February over the past 10 years, compiled by Schaeffer’s Senior Quantitative Analyst Rocky White.”
Of the 25 worst-performing S&P 500 members over the past 10 February’s, MGM is the only gaming and leisure stock on the list. Over the past two decades, the best-performing sectors in second month of the year are materials and energy while the worst groups are utilities and financial services. Gaming companies are classified as consumer discretionary stocks.
Dealt a Bad Hand
As of Sunday afternoon, there were more than 13,000 confirmed coronavirus cases worldwide and 300 deaths, including the first fatality outside of China. That case was reported in the Philippines.
The number of documented cases of the illness dubbed the “Wuhan virus” in Macau has remained at seven for several days, but the damage to January gaming data was already done.
As more instances of the illness emerged, China restricted travel in and out of the country, going so far as to temporarily freeze issuance of the visas used by mainland gamblers to access Macau. Some of the travel bans to the gaming center were announced just days before the start of the Chinese Lunar New Year festivities, a two-week long celebration that some analysts expected to get Macau GGR off to a strong start in 2020 following a volatile 2019.
Along with other gaming equities, MGM reflected the impact of coronavirus last month. The stock soared in the first half of January as the company announced the sales of the MGM Grand and Mandalay Bay on the Las Vegas Strip, a transaction worth $4.6 billion.
As coronavirus headlines emerged, shares of MGM tumbled, even notching a close below $30 for the first time since November. The stock finished at $31.06 last Friday.
Past performance isn’t guaranteed to repeat, but if it does for MGM in February, the month could be rough for investors.
“More specifically, looking back over the last decade, MGM stock averages a February loss of 1.2%, with only three out of 10 returns positive,” according to Schaeffer’s.
The stock’s median February loss of 5.21 percent is the worst among S&P 500 members and data out last week say options traders have been buying far more puts than calls on MGM equity, indicating they’re preparing for a pullback.