Picking the right defensive stocks will be paramount to investment success this year. Manufacturers are not in this group. International Game Technology (IGT) continues to perform reasonably well for the resources it has, but it is not a stock to hold. It’s not a great short play either, being range bound for 10 years and on the verge of a technical breakout. On a long term chart it looks like it may be set up for a breakthrough, nearing its highest levels since 2008. If the breakthrough happens it would be short-lived and technically driven, but it’s reason enough to hold off from shorting it for now.

Scientific Games (SGMS), on the other hand, has been busy going parabolic for over a year now, exploding by nearly a factor of 10, rivaling bitcoin. Well, not really rivaling it, but this is not stable price action. It won’t last. If you have some spare change hanging around some 2020 puts on SGMS are a good gamble. See if you can hit the jackpot. The $25 strike is going for $2.85 a contract now, and none have been traded since December 4th. Nobody’s in this trade, surprisingly. Puts closer to the current price of $56 are much more expensive. Could Scientific Games fall below $25 by 2020? Sure it can. Look what happened to IGT in 2008. It lost 80% of its value from top to bottom. If that happens to Scientific Games, gains on those contracts would be close to 5x.

Manufacturers are higher up on the production chain than retail casinos who serve consumers directly. Generally, the higher up on the structure of production you are, the harder you are hit when a boom turns to bust. That’s reason enough to avoid both of them.

Both IGT and Scientific Games have subpar balance sheets with heavy leverage. Scientific Games holds $8.2B in debt with a market cap of $5B. And that’s taking into account its monster rally of close to 1000% since January 2016. At basement levels, SGMS would have a leverage of about 1,450%. Bankruptcy in that case would not be out of the question. $4.2B of that debt is unprotected, and interest rates are already rising quickly now. If you want to risk shorting a manufacturer, SGMS is the one to short. Not heavily, but with spare change for decent gains.