The Stock: International Game Technology
The Trend: Sometimes amid all the economic thrusts of the market, the sliding bond prices and hot commodities, the brimming tech sector and the now-slipping precious metals stocks, investors should retreat into areas of comfort - areas of the market that seem more familiar, perhaps more understandable. For investors like Warren Buffet that may be represented by a consumer stock like Coca-Cola or an insurance company or maybe a railway. But others might be equally attracted to the business of gaming. The global gaming industry generates billions of dollars of revenue and is an entertainment pocket of the consumer discretionary sector that rarely seems to lose lustre, offering tremendous growth potential in areas of the world where incomes are rising - especially in the Far East.
Since last summer resort and casino stocks have been riding a wave of global liquidity and economic optimism. The Market Vectors Gaming exchange traded fund , which represents the holdings of 54 global gaming stocks, has been trending positively for almost five months and hit a new pitch of interest last week as its trading volume elevated. The share prices of a number of big name companies in the category - Wynn Resorts , Melco Crown Entertainment , Pinnacle Entertainment and MGM Resorts - underscored their already bullish trends by hitting new highs last week.
Among the current group of newly bullish stocks identified by the Stock Trends indicators is Isle of Capri Casinos and Boyd Gaming , and now would generally be considered good entry points for both stocks. So, too, for Las Vegas Sands , another bullish trending resort and casinos entry that is currently trading at its 13-week moving average trend line after retreating from its big fourth-quarter advances in 2010 and is a prime candidate for more positive share price moves. Investors looking to add to their global consumer discretionary exposure - and who confront no ethical dilemma in stock ownership of gaming enterprises - should look forward to more winnings in 2011.
The Trade: International Game Technology is a major developer and supplier of electronic gaming equipment, software and systems. Many of those colourful video games at a slots casino near you and in major gambling destinations around the world are developed and sold by this established tech name. The company, with a current market cap of $5.6-billion (U.S.), also has an online and mobile game presence, another growth-oriented segment of the industry.
IGT's stock has been rallying along with the gaming sector since late October, and has been tagged with a Stock Trends Weak Bearish indicator as it has out-performed the broad U.S. stock market significantly in the past month. Among Stock Trends' picks in recent weeks, IGT's stock is about to signal a moving average crossover and enter a new long-term bullish trend. In advance of the company's fiscal first-quarter 2011 results to be announced this week, IGT shares have traded actively, but stalled just above the $19 mark. The market's response to earnings and company guidance going forward could prove a timely entry point for those investors who anticipate this stock will achieve post-recession highs in the current rally.
The Upside: A 15 per cent gain to resistance near the $22 level would be a short-term objective for trend-following market timers. Long-term investors anticipating global economic strength and a bullish stock market in 2011 might have an assault back to even better valuations for this stock in mind- perhaps the pre-recession support level around $33.
The Downside: Disappointment always lurks, but it is something that will be evident in the very near-term. A drop below the $17.50 level would signal trade failure.
Skot Kortje has been analyzing stock market trends for 15-years using trend analysis. His Stock Trends indicators have been published by The Globe and Mail since 1995. For more go to Stocktrends.ca