Gambling Favorites

10/16/2002 12:00 am EST

Focus:

Jim Collins

Chairman and CEO, Insight Capital Research & Management, Inc.

I am always intrigued when different advisors with very different investment strategies, both find investment opportunities in the same industry. John Dessauer is a value investor, using in-depth fundamental analysis. Jim Collins is a leading practitioner of modern portfolio theory, focusing on technical momentum and relative strength. Yet despite their differing approaches, both have found buying opportunities among stocks in the gaming sector.

Says John Dessauer, in his newsletter, Investor’s World, “Park Place Entertainment (PPE NYSE) is moving aggressively to improve its operating profit margins. Costs for 2003 will be cut by $100 million. This comes on top of the new Park Place Connection customer loyalty program. In Atlantic City, where Park Place always performs well, a request has been made to merge Claridge with Bally’s. This would create the largest boardwalk casino in Atlantic City and allow Park Place to streamline operations for greater efficiency.

“Cash flow per share is estimated at $2.20 this year, with earnings expected to be $0.60. All new initiatives – debt reduction, property improvement, and cost control – will lead to wider profit margins and higher earnings per share. When any progress becomes obvious, valuation multiples will expand. Park Place is currently selling for less than four times cash flow. We rate this stock a buy. It can double for us in two years.”

Jim Collins, editor of Listed Insight, says, “Boyd Gaming (BYD NYSE) is a multi-jurisdictional gaming company. It is one of the country’s leading casino operators that caters primarily to value-oriented slot players. The company owns and operates 12 casinos in five states. In the second quarter ending June, the company reported revenues of $312 million versus $281 million in the prior year’s second quarter. Net for the period was $0.26 versus $0.14 a share. The growth in earnings was attributed to margin improvement.

“Technically, the stock took a big dip in mid-July, falling below $12 a share. The stock then  steadily climbed higher and hit its 52-week high above $19 on September 27th. Boyd Gaming receives an A rating for accumulation/distribution and has a relative strength of 99 (out of 100).”

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