The Las Vegas Sands (LVS) of Time

Did the Oracle of Omaha, Warren Buffett really tell his minions to buy an index fund at a recent Berkshire Hathaway shareholder meeting?

Indeed. He basically told his shareholders to reduce expectations or get out by selling Berkshire.

Well Mr. Buffet, with all due respect, “Kiss my grits!”

I wonder if anyone had the gall to suggest the same to him when he was building his little empire back in the day. Now that he has built that empire, he now says that active portfolio management offers no real advantages.

Hogwash!

It may be a challenge to deliver superior returns day in and day out, but it can be done. There are values all over the globe that provide investors the opportunity to outperform the market indexes.

Why all of the negativity?

Maybe it has to do with his age and the fact that Mr. Buffett has always avoided investing in markets that he did not understand.

Well, too bad for him.

That philosophy has resulted in a style that has missed many opportunities in some very exciting markets. Indeed, such an approach is no different from an index fund, so I guess it makes sense that he would state such a thing.

Betting on Better Odds

For those who still believe they can and should outperform a static index fund, there are options aplenty.

One of the best is… Robert Hsu. His China Strategy letter is full of ideas that have the potential to beat or exceed market performance.

If you don’t believe me, take a look at his track record!

Of course the past is no guarantee of the future, but it is a good place to start. With China still growing at a double-digit clip, there are plenty of great buying opportunities.

For example, Hsu recommended his readers buy shares of Las Vegas Sands (LVS) in March of 2006 when shares traded for around $50 per share. He subsequently sold when shares hit $80 per share in June of last year.

Such a trade resulted in a tidy profit of 60%. As it turned out, Robert left quite a bit of money on the table. LVS exploded to over $140 per share shortly after he sold, but he should not be criticized as shares fell back to Earth and below his sale price of $80.

The round trip may have been nauseating for those who continued to hold LVS, but provided a glimmer of what the future may hold for this exciting company.

Hsu revisited LVS in a recent journal entry for subscribers to his China Strategy letter. In the missive, he told the tale of visiting Macau giving his readers a firsthand look at the action in China’s sin city.

Needless to say, the competition is fierce explaining why Hsu was conservative on LVS. Such a state, combined with the slowdown in the U.S., and there was good reason to worry about gaming stocks.

That Was Then…This Is Now

That was then, and this is now. Hsu was very impressed with the U.S. casinos now operating in Macau, but he is not quite ready to pull the trigger.

I disagree with that assessment. While the explosive growth in LVS shares may have been a bit overdone, so too has been the selling. Buying LVS in the low $70s makes sense to me.

The selling has been mostly due to concerns over a U.S. slowdown. Many are now stating that the recession will be shallow at worst with an expectation for a recovery in the second half of the year.

If we wait on LVS, we may miss the boat. Shares are so volatile that any good news could result in a 20% gain or more in a very short period.

I think the downside is limited here and given the growth prospects, I would take a hard look at LVS.

Warren Buffett can go buy his index fund. I’ll take my chances in identifying strong growth stories that can still be had for reasonable prices. LVS is just one of those stories.

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