Alan Woinski's Monthly Syndicated Column


G2E - Savior For Slot Investors?


Syndicated Column by Alan Woinski
President Gaming USA Corp.



Investors in the suppliers to the gaming industry, the equipment companies per se, just love it when the leaves start to turn colors in the Northeast. While many enjoy the view, gaming stock investors know that when the leaves start turning colors and the temperature starts to drop, it usually means it is time for gaming supplier stocks to rise.

You see, each year the annual Global Gaming Expo, or G2E for short, takes place at the Las Vegas Convention Center sometime in September or October. It is at this show where slot makers, table game providers, systems providers and even those who provide such important things as cocktail napkins show off their latest and greatest creations. For gaming stock investors, the fun begins about a month before the show, around the time the companies start announcing what they will be displaying.

Slot makes and other suppliers make their announcements, analysts give their predictions on who and what will capture investors' imagination and investors usually buy up these stocks in anticipation. Unfortunately for most, that anticipation usually fizzles a few days before the show when profit taking usually sets in.

Since this tends to happen year after year, you have to wonder why investors do what they do since it usually means they don't make the profits they think they will. Actually that is not true because it is the traders who try to beat the street who don't make that money. The momentum guys, the ones who buy the stock, not the company, the ones who do not know the difference between a video slot and a reel slot, they are the ones that buy in and try to sell right after the show. Investors who hang on are usually rewarded a month or so later when the companies themselves disclose how successful of a show it was for them.

Also at this show is the Deutsche Bank/Goldman Sachs investor presentations. Just about every public gaming company on a listed exchange gets a chance to give a presentation and it usually receives some pretty widespread coverage from the mainstream financial media.

What all this boils down to is an opportunity for gaming stock investors to try to handicap what may happen and get in early, before the momentum investors and traders try to beat the street. This year there may be a fly in the ointment which may create an opportunity. The show this year is the earliest than we can ever remember, starting on September 13th. For investors that is both good and bad because the 30 day period which usually kicks off the pre-show runup takes place in the lazy, hazy days of summer, in the August doldrums. This is the time of year when volume slows on Wall Street as the big investors hide in their beach houses, trying to recharge before the post-Labor Day volatility that starts every year.

What we may see this year is a very short period for the pre-show runup, but it could also result in a more powerful push. Remember that this has been a very poor year for gaming supplier stocks so the opportunity is there for a dramatic runup as pent up demand and short covering send these stocks higher. At the same time the short lag time, the lack of enthusiasm displayed by supplier company executives could cause a "show me" rally where these stocks move up slightly and then, for the first time ever, rise after the show if there is a good performance turned in.

Besides the obvious new technology, new product lines and what will obviously be the real attention getter at the show, central server downloadable games, investors should also be aware that this show sometimes creates mergers or new alliances. You all know from past columns that we have been predicting consolidation on the supplier side, with the confirmation occurring a couple of months ago with the dream team alliance of IGT, Progressive Gaming (PGIC) and Shuffle Master (SHFL). You can bet that others have been talking since then and what better way to steal the spotlight at the show than by announcing a deal on the morning of the show.

In other words, we think there are investment opportunities leading up to this show, not the usual trading opportunities. There could be the potential for a home run investment leading into this show, if you get lucky enough to catch a merger or alliance announcement in one of the stocks you own but most importantly, the potential is there for this part of the gaming sector to get back into the spotlight.

Obviously IGT, being so far down from its highs, is a candidate for an investment leading into this show but if you are looking for a company that may be bought, or a company that could be part of an alliance, then you start looking at companies which have products or technology that can be attractive to the bigger companies or the few supplier companies who have had a strong year for their stock price. In other words, the likely buyers or those with the muscle to attract a strong partner are WMS Industries (WMS), Aristocrat, or GTECH Holdings (GTK). Companies that could be attractive to them include Alliance Gaming (AGI), Multimedia Games (MGAM) and private companies such as Konami Gaming. Of course you have the suppliers to the suppliers, the OEMs who have had such a tough time of it this year with margin pressure. Those companies include Wells-Gardner Electronics (WGA), TransAct Technologies (TACT), private companies such as JCM, Mars Electronics, Cole Industries and the list goes on and on.

The law of averages says that supplier stocks are ready for their 10 minutes of fame this year. Using history as a guide, those 10 minutes can turn into 30 days or more and begin any minute now.


To order your copy of The Gaming Sector…Yesterday, Today and Tomorrow
call 1-800-990-1902, or sign up from our subscription form online here.

Copyright © 2004 Gaming USA Corp.
Site Design & Development by Nutmeg Interactive
Privacy Policy    Terms & Conditions  Code of Conduct