The only thing harder than buying when you’re scared is selling when you’re happy. US regional gaming stocks are at or near all-time highs or at least decade highs, and there is no compelling reason to assume they will keep going higher, future mergers notwithstanding. There has been no compelling fundamental reason why they have skyrocketed so quickly and as high as they have either. I understand 20%, 40%, or even 50% higher in a year or two, but doubling is a bit much. It looks to be a case of trend followers piling on top of trend followers.

Penn National Gaming (PENN), Pinnacle Entertainment (PNK), and Boyd Gaming (BYD) have all skyrocketed over the last 12-18 months. This could theoretically make sense if all three were in store for a decade or more of uninterrupted growth and smooth sailing for the US economy from here, but that’s not going to happen. All three of them have been extremely volatile on the way up, which means they are more likely to be extremely volatile on the way down, and the way down is coming this year it looks like.

Penn in particular has already fallen 25% since topping, and stock market trouble has barely started. Penn’s fall hasn’t been much though compared to the spectacular rise since November 2016 when the stock was trading at around $12. We’re still 130% above those levels, which tells you how crazy these stocks have been.

Taking a look at the three individually, Penn’s EBITDA is down 24% since bottoming in 2016, and with inflation climbing and debt service already eclipsing operating profit, without organic top line growth its bottom line is going to stagnate at best. While Penn’s debt situation has improved since spinning off its real estate, it doesn’t justify a doubling, even with a Pinnacle merger pending.