A Board Member Bought International Game Technology

International Game Technology was one of Ariel Investments’ 10 largest holdings by market value at the end of September. Ariel was founded in 1983 by manager John Rogers (check out more of Rogers’ favorite stocks). The stock was also a favorite of Gates Capital Management, which made International Game its second largest position after increasing the number of shares in its portfolio by nearly 400% over the course of the quarter. Billionaire Steve Cohen’s SAC Capital Advisors also added to its stake, closing September with a total of 1.6 million shares (see Cohen’s top stock picks).

Bally Technologies Inc. (NYSE:BYI) and WMS Industries Inc. (NYSE:WMS) are two other gaming device and software companies. Their stocks trade at 12 times forward earnings estimates, based on expectations for the fiscal year ending in June 2014. As a result they seem priced right in line with International Game. These peers have also been recording good financials, with growth in both revenue and earnings in their most recent quarter compared to the same period in the previous year. Bally, in particular, recorded over a 20% growth rate in both top and bottom lines. They might be even better buys, and even with consensus insider buying at International Game investors should at least consider all three.

Of course, we can also consider casino stocks as being exposed to similar industry dynamics. Las Vegas Sands Corp. (NYSE:LVS) and Wynn Resorts, Limited (NASDAQ:WYNN) have forward P/Es in the 17-18 range, and this incorporates expectations of good growth next year as neither stock trades below 20 times trailing earnings. These are of course significantly larger companies in terms of market cap, but earnings are down. As a result we’d prefer the gaming stocks to buying casinos.