Aniket PujariMaybe it is worth waiting for stocks like Wynn Resorts , names so cheap that they can’t be explained. On Friday, I spent a considerable amount of time with Wynn CEO Craig Billings at his incredible hotel, the gem of the Las Vegas strip, talking about his business and its cockamamie stock price. Wynn’s valuation makes no sense. The market capitalization is roughly $8.8 billion. It has $2.4 billion in cash and a manageable amount of debt. You probably couldn’t build Wynn’s gorgeous properties in Vegas — the Wynn and Encore next to it — today for $8 billion. But these Vegas hotels aren’t even the most important properties of the chain. There’s Wynn Macau, which was originally built for mass Chinese gambling in the tourist hub. It cost $1.2 billion and opened in 2006. A huge Encore was added in 2010. The $4.2 billion Wynn Palace at the Cotai Strip opened in 2016, and is supposed to be a mecca for high rollers in Macua. Plus, Wynn is building a crown jewel, a $3.9 billion beachfront property in Dubai that’s going to have 1,500 rooms. As of this week, the Wynn Al Marjan Island is more than halfway done, on its way to 70 floors. It’s the only casino in Dubai and it will remain that way for many years to come. And lastly, Wynn purchased a very small casino in London that will serve more as a planted flag to tell Londoners that the UAE will soon be open for business and they should plan their next holiday there. (The company in 2022 sold and leased back its Encore Boston Harbor, a luxury hotel and casino that has provided a consistent return since opening in 2019). Together, you’re talking about roughly $10 billion of real estate in hotel and casinos generating immense profitability that you are getting for free if you buy this stock. It should matter, right? Not so fast, because there is a catch. We did this once already. That’s right: We bought Wynn Resorts for the trust and it failed us. We lost money. It was infuriating and we moved on. Nothing ever materialized and it just kept going lower and lower as China turned out to be a bust for so many American companies. Even more infuriating, you could have gotten an incredible double if you had bought Chinese companies instead of American companies who do business in China. That you could have had in Alibaba . Wynn CEO Billings is a very smart business person and he knows that there’s a tremendous disparity between what the company has put into these incredible income-producing properties and what they are worth now versus the piddling price of the stock. He did not demur, like so many other CEOs who say that the price of the stock isn’t what he’s thinking about. He’s thinking about it alright and it rankles him, as it should. But he and I agreed that there’s only so much you can do. Yes, you can buy shares — and the company’s buyback is fairly voracious — because it makes sense to put some of the money toward the stock. But you also want to invest in the business, and expect that investor sentiment will eventually change. Which brings me to the point of the anecdote. Craig and I discussed the notion that perhaps the market’s fixation on the Tech Titans has kept investors finding Wynn. It’s an intriguing position, one of no empirical evidence, but certainly a consideration. The megacaps did have tremendous mindshare. They still do, but now in a negative way. Here’s what I am hoping can happen. If Wynn stock had shed $10 billion dollars in market cap during the Biden administration, you would expect it to attract a suitor. But the only companies that would be interested in buying Wynn would be hotels and casinos. And had one tried to buy Wynn, I’m sure the deal would have been challenged by the Federal Trade Commission or the Department of Justice simply because it would represent consolidation that could lead to more consolidation that could somehow harm those who want to have a good time gambling. Don’t sneer. It’s true. The FTC in particular was that pathetic. It twisted and turned just to block deals for the sake of blocking deals. I have to believe the Republicans now leading these agencies will think that the shareholders have rights that should matter as long as the merger isn’t anticompetitive. In this new world, either management creates value for shareholders or someone else does. Or maybe Wynn just says enough is enough, we are going to take this private. The sum of the parts is that outsized versus the market cap. People don’t realize how much the Biden administration’s intransigent agencies may have played a role in investors avoiding stocks like Wynn. If a company knew its attempt to acquire would be blocked or held up, that company did nothing. So management had nothing to fear. And fear is a palpable trait when it comes to bringing out value, as I knew all too well from my years at TheStreet. We did so much good to stay independent. We bought back stock. We offered a dividend with a good yield for as long as we could. We tried endless initiatives, all because we wanted to get the stock up so we could remain independent and could profit from that status. We lost and we got taken over by someone anyway. This Wynn irony — that the more you put into a company the less its stock responds — is something that I think, sadly, was unique to the Biden administration. That’s why I think that if I had to do it over again for the trust, I would still consider it, but only if I were more positive about China. But I will tell you what I am positive about in the wake of the FTC changes and the low valuations of companies like Wynn: Goldman Sachs . Unlike the Oppenheimer analyst who downgraded it last week, I think it is inconceivable that stocks with clear valuation disparities to the businesses underneath them will stay that way. We might be back to the way capitalism used to be: either you bring out value or someone else will. We purchased additional shares of Goldman on Wednesday. But let’s ponder this Magnificent 7 quandary. Did people invest in these stocks — Microsoft , Meta , Alphabet , Tesla , Amazon , Nvidia and Apple — to the exclusion of other stocks, meaning that they only wanted the biggest and the best and weren’t interested in the smaller and the best? Or was it all self-fulfilling? Could it just because they were always going to be allocated money from index funds, each according to its ever-increasing size? Or did we just think that these companies were unstoppable? And because there would be no M & A, there could be no real value creation with an outfit like Wynn. And without M & A, they weren’t interested in the sum of the parts? Maybe it’s all part of the ennui we feel because, once again, we have become so focused on the negatives — a recalcitrant Federal Reserve, big unknown tariffs, and an erratic Commander in Chief (even as some insist it’s all a style of negotiating) — that we have forgotten what good investing might be about. I saw the unwillingness to learn new stories and to get enthused about opportunities all week. Admittedly, it was a Fed meeting week, but it was still the same old drill that happened during the Biden years. The people who are Fed-focused, and Fed-focused only, no doubt sold stock because they had to be discouraged about the drumbeat of stagflation and the anonymous chatter from Fed officials that things are going the wrong way. If you are focused on the Fed, you want for nothing. You can get around-the-clock Fed. There are people who seek clues to the Fed’s next move rather than insights about what companies might do well regardless of tariffs and even if there is the possibility of stagflation. Then there’s the group of people who decide to invest only when the coast is clear. They don’t want to buy when the futures take everything lower, and they don’t buy when the markets are flying because they feel they missed the move. The coast is never clear anyway. Lastly, there are the people who hate Donald Trump, and for them every opportunity is a selling opportunity because they don’t know what he will do next. But think about what I was screaming about on “Squawk on the Street” Friday morning to my friend Sara Eisen? I was saying that we have all become prisoners of negativity because we don’t think anything can go right. It’s so bad now that we hunt for bad as an excuse not to invest. Thursday night, for example, FedEx reported a quarter in which it bemoaned a slowdown in industrial activity. Was anyone shocked at that? To me, what was shocking was the incredible amount of money FedEx made without snaring nearly as much revenue as we expected. I said to myself, “What happens if things get better?” But from the looks of that free-falling stock, I was pretty lonely in my optimist’s view. Or take my meeting on Wednesday with the Home Depot people at the company’s annual meeting for store managers. Here’s a stock that is so heavy and so “for sale” at every turn you can’t even imagine why anyone would buy it — except that’s precisely what you are supposed to be doing at this point in the cycle. Unless the Fed decides to start raising rates, Home Depot is the quintessential retailer to own. I think I am going to be right buying it here. Not all at once. It’s too heavy. There is stock for sale everywhere. You buy Home Depot down in pyramid style, where you get bigger as you go lower and you get yourself a terrific position in Home Depot for when things get better. Not if, when. But the people I hear and see today? They only want to buy Home Depot when things have already gotten better. To me, that’s a ticket to paying $450. It’s hard to pin down how much of this negativity can be laid at the feet of Trump. Is he the reason why shares of Micron rally 6% at night and then fall apart in the morning? Is he why Nike stock rallies $3 then falls $9 from that level? I don’t think so. But he does seem to be behind a lot of the gloom that makes you want to join sellers when a stock shifts direction fast. I know that this Trump is very different from the previous one. This one is about extracting something from everyone. It’s sometimes difficult, if not painful, to watch. In the end, though, you have to remember that he doesn’t want stagflation and he will not be so bullheaded to mandate it. He doesn’t want a recession and, hopefully, the job market stays strong and the tariffs don’t jack everything up in price. However, some things are beyond my understanding. We have a partnership with Canada that, somehow, has become toxic. We are tackling DEI intransigence versus focusing on cutting our $36 trillion in debt. We are exacting tribute from the hapless Paul Weiss law firm for harboring someone who the President says had a vendetta against him. These almost random lash outs create a runaway train level of fear among many investors who don’t know what to expect. So they use Trump as a reason for selling whenever others are selling. Their investing mantra sounds something like this: “As long as this Trump is president, I am going into gold or Europe or Asia, anywhere but the US.” And that, in the end, is what’s really happening. Anything that he says that is contrary to his new self, like when he said there could be flexibility to his tariff obsession, creates the equivalent of a buying panic. I don’t want to think that investing — not Fed navel-gazing, but investing — is a casualty of this White House. But for many, it’s the real reason why Wynn, along with so many other stocks just like it, are ignored or go begging. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
This photograph taken on October 20, 2022 shows the signage of Wynn Casino resort with the Grand Lisboa and Casino Lisboa in the backdrop in Macau.
Eduardo Leal | AFP | Getty Images
Maybe it is worth waiting for stocks like Wynn Resorts, names so cheap that they can’t be explained. On Friday, I spent a considerable amount of time with Wynn CEO Craig Billings at his incredible hotel, the gem of the Las Vegas strip, talking about his business and its cockamamie stock price.
