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2 Gambling Stocks You Can't Afford To Ignore

 January 20, 2012 03:42 PM
 

With such a slow economic recovery in the United States, many states are getting creative in how to increase their tax bases. Politicians read the news headlines and are well aware that gambling has taken off in parts of Asia, including Macau and Singapore. Current estimates are that Macau's gaming revenue reached $33.5 billion in 2011 and grew 42% compared with 2010 levels. The top 20 markets stateside brought in $31 billion in gaming revenue, and politicians are starting to wager that there is plenty of room for new domestic casinos.


That's good news for investors in gambling-related stocks.

Recent headlines are indicative of the coming wave of new gambling destinations. A bill in Florida is set to approve the building of three casinos in the state. A study in Kentucky has estimated that allowing casinos at eight racetracks throughout the state could bring in $1.1 billion in sorely needed annual revenue. New casinos in Pennsylvania helped gaming revenue jump 22% to $3 billion in the state last year. Indian-based casinos also continue to expand across the country, including the Hard Rock casino brand owned by Florida's Seminole tribe.

Clearly, the large casino operators, including Wynn Resorts (Nasdaq: WYNN), Las Vegas Sands (NYSE: LVS), and Caesar's will garner a high percentage of the action in terms of contracts awarded. But they'll have to compete with Indian casinos and also split contracts with state and local governments. The same can be said about overseas governments.

Given the uncertainty of how that might play out, your best bet is to invest in the leading gaming suppliers. Regardless of how revenue is shared, their slot machines, table games and related supplies are an indispensable part of every casino built.

Here are two solid bets for your portfolio...

1. International Game Technology (NYSE: IGT)
Market cap.: $5.1 billion

International Game Technology is the largest gaming supplier in the industry.


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Rich
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