While the "Blue Chips" and the rest of the market fizzled, the gambling chips" or casino issues continue to sizzle yesterday in what is the markets biggest speculative run-up in years.
Resorts International, which is so far the only company with an operating casino in Atlantic City, saw its stock score the most sensational gains yet in what was already the stock market's highest flying performance of 1978, defying predictions that its bubble is due to burst.
Resorts class "A" stock jumped 23 points to 190, following a gain of 17 points on Tuesday and 15 points on Wednesday. Its low for the year is 15 and two years ago it was trading at just over $2 a share. With a 3-for-1 stock split declared for Oct. 6, resorts "A" when-issued stock meanwhile climbed 8 1/4 to 64 1/2 in its second trading day.
The action was even steamier in the thinly traded Resorts class "B" shares.
Resorts "B" climbed 54 points - which may be a one-day record - to 266, following a 19 1/2 point gain on Tuesday and 27 points on Wednesday. Its low for the year was 18. The "B" when - issued stock meanwhile rose 15 5/8 to 90 5/8.
The stock action followed the Resorts annual meeting in Atlantic City on Tuesday where company chairman James M. Crosby, in response to a shareholders question, said Resorts earnings of $15 a share is "achievable." He cautioned shareholders not to rely on that 'because we don't know what the winter will mean" at the new casino.
By comparison, the company earned only 78 cents a share in 1977, before extraordinary items. Since opening on May 26, Resorts has reported pre-tax casino earnings of $62.7 million through the end of August.
With the company's casino only open since last Memorial Day, shareholders are apparently doubling the $15 a share figure to $30 to project what kinds of earnings the company can expect in 1979 when its casino will be open for 12 months. However, stock analysts caution that the current situation is unique since Resorts is the only game in town, and a number of other companies have announced intentions to open Atlantic City casinos.
Caesar's World broke ground for a hotel on Wednesday, and Del. E. Webb announced yesterday it had bought the President Hotel on the Atlantic City boardwalk. Bally manufacturing also has plans for a hotel.
The action, in Resorts, Which is traded on the American Stock Exchange, is particularly remarkable since the exchange has raised the margin requirement on the "A" shares to 75 percent, and on the "B" shares to 100 percent, so investors cannot play on any borrowed money in the latter case.
Meanwhile, brokerage firms have been trying to warn individual investors away from these shares for fear they could get hurt, but the investors have apparently not taken the proferred advice.
"The brokerage firms have tried to be responsible," one executive of a major retail firm said yesterday. "Customers come in and ask for a certain number of shares of gambling stocks, and we try to dissuade them. But the customer says, I insist. Three days later, the stock is up 15 to 20 percent, the broker looks foolish for being cautious."
"It's very difficult to protect people from their own greed, and there is only so much you can do in this regard," commented Harold Vogel, an entertainment analyst with Merrill Lynch, Pierce, Fenner and Smith who has written a report on the gaming industry.
Explaining the continued large advances in the gambling stock, Vogel said that "this group, if you combine all of the major companies, has a relatively small market capitalization. Since it seems to be the only thing of interest in the total market, and all the activity is concentrated in such a thinly capitalized group, it makes for enormous price moves and enormous volatility."
Other casino-related stock showing strength yesterday included Caesar's World, which rose 2 1/8 to 61 3/8, and Holiday Inns which gained 1 1/4 to 32 1/4. Ramada Inns topped the most active list on the Big Board and closed up 1 3/4 to 14. And Del. E. Webb jumped 3 1/2 to 35 3/4.
Meanwhile, few of the issues fell victim to profit-taking. Bally Manufacturing, Harrah's and Playboy Enterprises all ended the day with fractional losses following earlier gains.