As we enter the month of September, historically known as the weakest month for U.S. stocks, investors are facing a period of caution due to various factors. These include poor market performance in September, uncertainty surrounding the Fed’s decisions, and the upcoming presidential election.
With earnings reports from companies on the horizon, investors are bracing themselves for potentially lackluster financial results. The presidential election adds another layer of uncertainty, as both candidates have differing approaches to handling public debt.
Given these circumstances, investors may find themselves in a holding pattern, waiting for seasonal trends to unfold, earnings reports to be released, and election results to be determined. The Federal Reserve’s interest rate decisions will also play a role in shaping investor behavior, influencing decisions related to debt, equity, and corporate activities like mergers and acquisitions.
In this environment, investors may consider a two-pronged approach: marking time and seeking out opportunities. While it may be tempting to capitalize on undervalued gaming stocks with long-term potential, there is also merit in investing in solid businesses that offer dividends and share repurchases.
On the opportunities side, companies with strong growth strategies and increasing profits stand out. Names like Red Rock Resorts, Churchill Downs, Light and Wonder, and Aristocrat Leisure have demonstrated their ability to generate profits consistently. However, these companies may no longer be considered cheap investments, with price-earnings ratios above 20 times.
For investors interested in the digital gaming sector, companies focused on sports betting and iCasino present growth opportunities. Leaders in this space include Flutter, DraftKings, Sportradar, and Better Collective.
Additionally, there are speculative special situations that offer high risk and high reward potential. From brick-and-mortar operators like Full House Resorts to niche suppliers like Inspired Entertainment, there are opportunities for investors willing to take on additional risk.
It is important to note that the companies mentioned are just a few examples in their respective categories, and there are many others to consider. In conclusion, while it may be a period of caution for investors, there are still selective stock picks to be made in the market.
