2013 was a year of incredible strength for the casino industry.
In fact, the
Market Vectors Gaming ETF (
which arguably serves as a barometer of the global gaming market,
has soared more than 44% on the year, easily crushing broad
benchmarks in the process. And with a strong consumer market, there
is plenty of reason to believe that this trend can continue in 2014
While investors can certainly play this trend with any number of
casino operators, an often overlooked way to target this market is
by investing in firms that make the games and technology in the
casinos. This approach ensures that investors play on the broad
trends in the market, while simultaneously staying away from the
cutthroat competitive environment that exists between the many
casinos in the world.
One firm that is worth a look in this corner of the market is
Bally Technologies (
BYI in Focus
Bally is a Las Vegas-based company that designs, operates, and
manufactures gaming systems for casinos across the globe. A big
focus of the company is the slot machine segment, though it has
some exposure in
'smart' table games
This approach has been a winning strategy for BYI in 2013, as the
stock has appreciated by more than 70% in the time frame. Yet,
despite this huge surge, BYI could still be a great pick thanks to
a modest PE below 20, and rising earnings estimates.
Although the near term earnings estimate revision picture is a bit
choppy, the longer term revision results look pretty promising. Six
estimates for BYI's full year earnings have gone higher in the past
60 days (with zero going lower), while five have gone higher
(compared to zero lower) for the next year time frame.
Plus, over the past two months, earnings have moved a bit higher
for the current year period, enough to give BYI a nearly 17%
projected EPS growth rate. And with growth of nearly 13% projected
for the next year period, it doesn't appear as if BYI's story will
be slowing down too much either.
But if investors are worried about BYI meeting these higher growth
levels, don't worry too much, as the company has an amazing track
record at earnings season. The firm hasn't missed since 2011,
including 10 straight beats, so BYI seems to have the surprise
momentum behind its stock.
Thanks to these figures, BYI has earned itself a top Zacks Rank #1
(Strong Buy), which means we are looking for more outperformance
from this stock in early 2014. And best of all, in the gaming
industry, BYI is currently the only stock with a top Zacks Rank, so
it may be the preferred way for investors to get in on the hot
casino market this year.
The casino market was very strong in 2013 as consumers came back
due to rising housing prices and declining unemployment. This led
to some serious outperformance for firms in the gaming industry,
pretty much throughout the year.
While many investors may have zeroed in on casino operators to play
this trend, firms that make the machines might also be an
interesting play. These might not face as intense competition, and
with the booming market, could see higher demand, suggesting that
BYI and other gaming machine makers could be very interesting plays
to start 2014.
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