Published:
September 24, 2007
The
correct answer is
(A.) Slot Machines
Slot machines generate about
two-thirds of Las Vegas casinos'
revenues and an even higher
percentage in other markets, such as
Atlantic City. In Nevada, slot
revenues surpassed those generated
by blackjack and other table games
in 1981 and never looked back.
And because players love slot
machines, so do casino managers.
Despite rising costs, a popular slot
machine can pay for itself in a
matter of weeks and requires little
additional overhead -- no dealers or
croupiers are needed. Plus,
predetermined payback percentages
ensure that the house hangs on to a
large chunk of the cash.
You may have won a few coins from a
slot machine, but there is a better
way to make money with them:
investing in the stocks of slot
machine manufacturers. Just a few
players dominate the market; in
fact, casino operators get the vast
majority of their slots from just
two or three vendors. This means
manufacturers can often negotiate
more favorable terms, and because
buyers aren't particularly price
sensitive, slot makers have
considerable pricing power. On top
of that, the licensing and research
& development expenditures create
formidable barriers to entry to
competitors.
What's more, gaming has gone
mainstream, and cash-strapped
jurisdictions across the country
have turned to slot machines (either
in casinos, slot parlors, or
racetracks) as a new source of tax
revenues. There are many of these
cities and towns in the U.S., and
they are a huge source of new revenues for slot machine
manufacturers.
Based on all of this, you would
think that investing in any old slot
machine manufacturer is a
no-brainer, but that's not the case.
StreetAuthority's Nathan
Slaughter has studied the slot
machine business extensively for
StreetAuthority's premium value
investing newsletter,
Half-Priced Stocks, and he's
discovered two manufacturers that
are expected to receive the bulk of
the industry's growth. This includes
one company that supplies three out
of every four slot machines in North
America, yet still trades well below
its fair value. But to read
Nathan's in-depth analysis of the
industry and his two favorite slot
machine manufacturers, you need to be a
Half-Priced Stocks
subscriber.
Follow this link to learn more.
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