No. of Recommendations: 1
Hi everyone,

Still going through these for new ideas. Western Refining has been a good choice in the week the port's owned it -- ha!

Bill Mann recently told a group of us here that in running a port, you've got to be able to turn over a lot of rocks fairly quickly. The corollary is that you've got to be able to say "no" fairly quickly, too. With that in mind...

I've always had a soft spot for casino and gaming stocks. I enjoy visiting casinos (my wife and I are going to Las Vegas the weekend after the Fourth) and I like the idea of making money off of a sure thing (casino game odds always favor the house).

However, the two casino and gaming companies on the list aren't going to be entering the MUE port anytime soon.

Ameristar Casino (ASCA) -- 2.4% / 1.2% / 0% at $22.36 per share -- is a former Hidden Gems pick. It operates casinos in non-big name gambling destinations (St. Louis, MO; Omaha, NB; east Chicago and a couple of others). Unfortunately, its debt load is pretty onerous (D/E = 3.95) and it is skating on the edge of making the interest payments (EBIT-to-interest, called the coverage ratio, is 1.8). Pass.

Scientific Games (SGMS) -- 3.9% / 2.0% / 0% at $9.69 per share -- makes printed lottery tickets, lottery transaction machines, and machines and systems for pari-mutuel betting. It, too, is in trouble. It's had a net loss for the past 3+ years and had been on a downward trend for the three years before that. It's D/E is near a 9-year high at 2.88 and over the past two years, its coverage ratio has been 1.0, meaning that all operating income has gone to pay interest payments. Pass.

This is going to be the situation with the majority of the situations that show up on this kind of screen. Basically, I'm looking for companies that the market thinks will do very poorly going forward. Most of the time, the market's going to be right. I don't think the market is efficient, but in the words of my friend Jim Gillies, it's mostly efficient.

Cheers,
Jim
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