the gaming
investor
by Alan Woinski

Crash
How will April's dramatic dip on Wall Street affect you?

It’s right around the tax deadline of April 17th, and suddenly there’s a stock market crash. This is not a science fiction movie plot—it really happened. In a 30-day period, the Nasdaq Composite Index fell 34 percent, wiping out $2 trillion worth of wealth.

It wasn’t until the end of that 30-day period that gaming stocks were thrown out with the bath water. While technology stocks crashed and burned, gaming and lodging stocks were actually leading most sectors on Wall Street as money left technology and went into more traditional industries.

What does the market crash of March/April 2000 mean to your portfolio? What could it mean to you, the gambler?

As for your portfolio, unless you were heavily invested in Internet and technology stocks, it really shouldn't mean much to you. Markets correct every year and if you are in good, solid companies, you can weather the storm, no matter how long it takes. Unfortunately, if you went against our advice and followed the herd instead of investing based on fundamentals, you may be smarting a little bit right now, and it may take some time to recover. Investors in consumer Internet companies such as Dr. Koop.com and CDNow.com may find their investments—and even those web pages—disappearing in the future, as these companies relied on constant infusions of cash from the exercise of options and purchase of equity. When stock markets have deep, sharp corrections or crashes, investors tend to fly the coop (no pun intended to the good doctor).

As for casino companies, the ripple effect in the economy could be felt in the future. It usually takes quite a few months before the economy feels a change from the wealth effect. As gaming consumers, if the economy slows due to the market gyrations, you may begin to benefit by lower room prices and increased marketing programs. Casino companies’ earnings could be affected. This is why a market correction can turn into a crash very quickly—the smart money realizes what could happen in the future.

To gaming stock investors, we urge you to stay the course. If you own quality companies such as Harrah's Entertainment, Park Place Entertainment, International Game Technology or Shuffle Master, Inc., you have investments in companies which have the financial backbone and management experience to ride out any type of short-term turbulence. Speculative investments such as Internet gaming stocks and low-priced stocks usually take the longest to recover after a sharp market correction.

Due to new technology and the new mentality of the investment community, the stock market moves quicker than it used to. To see Nasdaq fall 34 percent in a month is something that never would have happened years ago. By the time you read this, Nasdaq could be down 50 percent from the highs set in March, or it could be back up to new highs.

Believe it or not, gamblers have an advantage in a market like this. They’re used to playing streaks, and they know there are times when you have to ride out the storm before you get hot again. As always, your visits to the casinos and your communication through monthly slot club mailings gives you the edge in the research department, at least in terms of gaming stocks. You may very well know before anyone on Wall Street just which casino companies are preparing for the future, and which ones are sitting back, waiting to see what will happen.