"Since the first 'one-armed bandit' was introduced in the late 1800s, slot machines have become a thriving multi-billion dollar global industry," says says Nathan Slaughter. "And International Game Technology (NYSE: IGT) is the '800-pound gorilla' in the slot machine industry" he explains in his Half-Priced Stocks.
And while he notes that the earliest slot machines were crude mechanical devices, the latest are "technological marvels," equipped with rich high-resolution plasma monitors, stereo surround-sound speakers, live streaming video, and other features.
And looking ahead, Slaughter explains, there are other exciting developments on the horizon to look forward to -- such as server-based gaming, where entire banks of slot machines connected to a central server can be reconfigured instantly.
In Nevada, he notes, slot revenues surpassed those generated by blackjack and other table games in 1981 and never looked back. Last year, he observes, they accounted for 66% of total casino revenues statewide.
He explains, "There are no guarantees inside a casino -- but it's a safe bet that slot machines will continue to rake in billions of dollars for their owners in the years ahead. And nearly three out of every four units in operation in North America are stamped with IGT's brand.
The company, he adds, has worked hard to cement its position as the runaway market leader -- spending nearly $190 million on research and development last year alone.
Indeed, in Casino Player magazine's latest 'Best of Gaming' survey, readers selected their favorite slot machines in four different categories -- and IGT took home the gold medal in all four.
Looking ahead, says the value advisor, the introduction of gaming into new jurisdictions (as well as property development in existing markets) should be a huge source of untapped revenues. For example, he points out, over 1,100 new games have recently been installed in tribal casinos in Florida, and another 1,400 in "racinos" in several New England states.
And in Las Vegas, he contends, the grand opening of Station's high-end Red Rock Resort last year resulted in orders for thousands of new machines, and 80% of that business went to IGT.
Overall, he suggests, "We know of few other companies with a commanding 70%-plus share of a growing market, strong pricing power for its products, and a recurring revenue stream that flows in regardless of sales. Better still, government-regulated barriers to entry help keep competition to a minimum." Slaughter concludes, "Now is an opportune time to grab a piece of this well-positioned company."
Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.
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