MGM and VICI: Finding Value in the Las Vegas Selloff | Value Options Podcast

The hosts frame the recent market as a broad selloff in small caps, cyclicals, financials, and consumer-facing names, arguing that business values and stock prices have become badly detached. One host compares the environment to prior dislocations like 2011, the meme-stock unwind in 2021, and even the Nifty Fifty era, while noting that higher long-term rates and expensive energy are pressuring smaller and more leveraged companies first. They also argue that AI beneficiaries and a handful of mega-cap names have become stretched on valuation, even if their businesses remain strong.

A major thread is whether the current AI buildout is creating durable profits or simply massive capex with uncertain payback. The guest points to soaring spending by hyperscalers and says free cash flow is lagging earnings, while the host raises the risk that pricing power may weaken if customers can access cheaper models from competitors. Both suggest the market may be overpaying for long-term growth assumptions in parts of the AI complex.

The most concrete value idea is MGM and VICI. The guest says MGM fell sharply after its acquisition deal broke, but still looks attractive because of free cash flow, Macau exposure, and optionality from Japan. VICI is presented as especially compelling: a REIT with 100% occupancy, long lease terms, and tenants like Caesars and MGM, trading around 10 times cash flow with an 8% dividend. The guest also cites MSDL as an example of deep value in credit, with a discount to net asset value and a double-digit yield.