Forbes – Anointment of the 2016 Republican presidential nominee is far off, but one thing already seems clear: Sheldon Adelson will have the victor’s full attention. The billionaire CEO of Las Vegas Sands recently convened a meeting in Las Vegas to which likely contenders for the nomination flocked. They covet the massive scale of financial support that Adelson lavished on Newt Gingrich, and later Mitt Romney, in 2012.
“Everybody knows that, behind closed doors, politicians often sell themselves to the highest bidder; this time, they were doing it in public, as if vending their wares at a live auction,” commented Dana Milbank in the Washington Post.
The pilgrimage to Vegas (dubbed “the Adelson primary”) would seem to set up a speculative play on the 2016 election. Given Adelson’s pivotal financial as moneyman, the GOP nominee will presumably be sympathetic to his pet cause, a nationwide ban on Internet gambling. Adelson views online gaming as a competitive threat to his casinos. If the issue is not resolved by 2016, watch for brokerage houses to tout land-based casino stocks such as Sands as a bet on a Republican victory.
Make careful note to ignore that advice. The problem is not just that you could wind up backing the wrong horse. Suppose you correctly predict a Republican victory after going long the casino names, or, alternatively short those shares as a bet—which proves right—that the Democrat will win. There is a good chance that the stocks with which you expressed your election call will go the wrong way.
Research I conducted 20 years ago [1] showed that basing stock selection on future political developments is chancy. Along with my colleague of the time, Jón Jónsson, I found that stocks touted as beneficiaries of Ronald Reagan’s proposed federal tax reform underperformed the market when the legislation passed in 1986. In 1992, a portfolio of stocks that were expected to rise if President George H. Bush was reelected outperformed the S&P 500 despite his defeat.
