Investor's Business Daily, which tracks 41 companies in its Leisure-Gaming/Equipment industry group, including manufacturers of slot machines and other gaming equipment, has published a ranking on stocks that have nearly tripled since hitting a low in July 2002. The IBD table shows that the Las Vegas strip is booming, and gaming stocks have followed right along, keeping in good shape despite the stock market's softness this year.

Within the powerful gaming industry, IBD found the stocks with highest earnings growth and price performance, using its Earnings Per Share and Relative Price Strength Ratings, and excluding any stocks trading under US$15. Las Vegas is holding on to its title as the gambling capital of the world despite increased competition, such as online wagering, but in response to that the major Vegas companies are expanding abroad.

Macau in South China has been the preferred destination for Las Vegas Sands, MGM Mirage and Wynn Resorts amongst others, and the Chinese enclave’s gambling revenues for 2004, There is speculation that with the potential of the Asian market, gambling revenues in Macau by 2010 may overtake Las Vegas. With gambling legislation in many US states, new markets have opened for many gaming companies, and a series of recent merger deals may strengthen the industry further. The IBD Seven are:

1. Monarch Casino & Resort
The top-rated gaming stock doesn't do business in Vegas but in its smaller Nevada cousin, Reno. With just one casino resort, the company's earnings grew strongly last year. Profit more than double in the December-ended quarter. Return on equity (29%) and cash flow per share (US$2.80) also are strong.

2. Boyd Gaming
Owns four casinos in Las Vegas and has operations in five other states. Last year, the company reversed a string of lower earnings growth to post three straight double-digit quarters. Sales growth has accelerated the past five quarters. As of year end, 117 mutual funds owned the stock, against 85 in the first quarter of 2004.

3. Penn National Gaming
Besides a number of casinos, it also has racetracks. Earnings growth has ranged from 25% to 100% the past seven quarters, but sales growth slowed in 2004. The outlook for fiscal 2005 was upgraded, but notched lower for 2006.

4. Ameristar Casinos
It has six casinos, mostly in the Midwest, and nearly 1,200 hotel rooms. Sales growth has been only 7% to 14% the past six quarters, although return on equity of 21% and cash flow per share of US$5.15 a share are positive. The company increased its dividend in February.

5. MGM Mirage
It owns some of Vegas' largest hotel/casinos, including The Mirage, New York-New York and the namesake MGM Grand. Earnings growth, although strong, has decelerated in recent quarters while the 2005 and 2006 outlook was trimmed lower. The company is acquiring Mandalay Resort Group, another major Vegas operator.

6. Station Casinos
It operates eight lesser-known hotel/casinos in Nevada. Earnings growth has decelerated the past five quarters, but forecasts for fiscal 2005 and 2006 have been revised higher. Return on equity is a lofty 32%. The company has boosted its quarterly dividend twice in the past year.

7. Caesars Entertainment
Another Vegas titan, it owns Bally's, Paris, Flamingo and flagship Caesars casino properties. It's one of the biggest gaming companies, with 29 hotel/casino properties. Earnings in the fourth quarter of 2004 doubled over the year-earlier period. The stock has been trading near all-time highs despite a sluggish performance the past few weeks.

Investor's Business Daily is not a traditional business newspaper. It's a comprehensive stock-rating and investment system founded by chairman William J. O’Neil in 1984. At present, O’Neill is assisted by a carefully selected management team, which consists of specialists in many areas and took O’Neil years to build. The company’s core objectives are defined annually and regularly reviewed and evaluated by the entire management committee. O’Neil is known for saying the strongest attribute his team can have is a positive attitude, since from the launch of IBD it became apparent to him that an intelligent person was only as good as their attitude.

Investor’s Business Daily was originally created to offer information not available in The Wall Street Journal and other investment publications, and specialist and added relevance in the data and features delivered. Ultimately, O’Neil wanted a better product for both investors and business executives who did not have time for two and three section papers each day.

In the 1980s and early 1990s, it was a remarkable “David and Goliath” story, with Investor’s Business Daily up against traditional newspapers, including the hundred year-old established giant, The Wall Street Journal. IBD brought innovation and out-of-box thinking to investment publishing. When you look at any cross section of American business, statistically, you’ll find it was the small, new, entrepreneurial companies that created most of the new market niches, built better, new products, and surpassed older giants in the industry.

Examples were when IBM saw competition from Microsoft; Honda competed with Chrysler, Ford and General Motors; and there are numerous examples each new market cycle, where new leadership - often with new products - led the way. No matter how big a ‘household name’ a company might have, they can become a laggard if their competitive edge isn't sustained. Innovation is the primary driver behind most emerging stock successes, and IBD as a publication is also such an example. (E-03.29.05)

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