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Buy Low, Sell High

Do you wait out the vagaries of the market or do you leap on opportunities?

by Frank Fantini


nvestors tend to break down to those who take a long-term view of the market—maybe even take on an owner’s attitude and want to grow

with a company—and those just itching to trade. And, while there is frequent—and dare we say

endless?—debate over which view is superior, the fact is that both approaches offer opportunity to make money. We recently were struck by such opportunity

when the stock market reacted strongly in different directions to news affecting two very different kinds of companies. In one instance, Bally Technologies announced

that its earnings this fiscal year would be lower than expected because of a variety of reasons, but CEO Dick Haddrill also gave reasons why the long-term prospects for the company remain strong. By the next morning, the sell-side analysts had

taken down their earnings estimates, not just for this year but next, as well. They cut their target prices, and at least one, Joel Simkins of Macquarie, downgraded his rating to neutral. The result: Bally sold

off 5 percent. But within three days,

lent market reaction came around 11 a.m. one recent Thursday. The Nevada Gaming

Bally shares had recovered. The next episode of vio-


Still, it didn’t take long for traders to react. The

stocks shot up, especially MGM. Within an hour, it was up 11 percent. Normal trading volume had doubled by lunchtime. Whoever was first on the news made quick

bucks. But, like with Bally, the overall fundamentals

really hadn’t changed. Take out baccarat and Strip revenue actually declined 2 percent. Slot revenue, a better gauge of business volumes, fell 9 percent. And part of the big bacc win came from unusu-

ally high hold. A lot of big players lost big. Luck can turn. And, over time, hold will fall to normal levels. In the reaction to Bally’s earnings, only

dime here or a quarter there on a stock price, not buying, and

mistake as an investor was trying to save a

Warren Buffett once said his biggest

Commission had just released gambling revenues for February. The Las Vegas Strip was nearly off the charts with revenue leaping 32.9 percent over last year. What’s more, the improvement was concentrated in baccarat play, a way of saying that casinos appealing to high rollers did killer business. Put yet another way, Wynn Resorts, MGM

missing out on much greater appreciation as the business grew.

Macquarie’s Simkins among the prominent analysts seemed to pick out a fresh reason to be wary of the stock. The field of suppliers is getting crowded with competitors, and it will become harder to grow market share, he said. Other analysis focused on slow gaming opera- tions revenue (a result of recession) and softer-than- expected orders from casino companies (another reces- sion effect). But recessions end. And

into Bally’s mini-bear missed out on the recovery later in the week, while a trader had the chance to buy on the dip and sell into the rally. Still, the 5 percent and 10 percent moves are

Mirage and Las Vegas Sands are the likely benefici- aries, though until they report their first-quarter results, we won’t know which, or what combination of them, benefitted and by how much.

small compared to long-term potential. Warren Buffett once said his biggest mistake as

an investor was trying to save a dime here or a quarter there on a stock price, not buying, and missing out on much greater appreciation as the

Global Gaming Business • May 2010

Haddrill, in his comments, noted the growing pipeline of systems orders (even if some have been delayed), coming gaming expansions in the U.S. and overseas, and the inevitability of the replacement sales cycle turning up. So, an investor who sold

business grew. We feel much the same way about reacting to

news, though many traders who profited over the volatility would surely disagree.


A sign of the discounting times in Las Vegas is evi- dent at Four Seasons, of all places. When handed keys to our car upon leaving

recently, the valet also handed a little thank-you envelope. Inside: a $50 coupon for the hotel’s spa and a 25 percent-off dinner coupon for the Verandah restaurant on a weekend. When Four Seasons starts couponing, you know hotels are scrambling for customers.


On the supplier side, Shuffle Master has always been a growth company, reinvesting the consider- able free cash it generated. Under new CEO Tim Parrott, the emphasis has

been on paying down debt, a pursuit that will free up even more cash in the future. Meanwhile, Shuffle Master is improving margins and expects to grow sales in the upper-single digits, making for even more free cash. So what’s Shuffle Master to do? Asked that question at the annual meeting,

Parrott talked about the lack of attractive acquisi- tions right now, then said: “We like the idea of a dividend.” Given its more mature business lines and more

manufacturing-like business model, a dividend may make sense. It also might make sense for other gaming

companies, especially the regional casino operators who, for the most part, are winding down growth projects and might find dividends attractive as debt declines and cash flow grows. Ameristar is the lone one to pay a dividend today, but Boyd did so not long ago.

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is avail- able by calling toll free: 1-866-683-4357 or online at Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56
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