It's poker time again. Next Tuesday, July 6, coverage of the 2004 World Series of Poker (WSOP) begins on Disney's (NYSE:DIS) ESPN, taking a weekly slot through September 14.
It's no secret that tournament poker ranks among the fastest-growing sports. This year, the number of players who made the $10,000 buy-in for the championship event at Binion's Horseshoe in Las Vegas more than tripled from 839 last year to a whopping 2,576. That merely capped off the past year's growth exhibited on the World Poker Tour (WPT):
World Poker Tour Tournament Growth (# Buy-ins)
| Casino | Season 1 | Season 2 |
|---|---|---|
| Aviation Club | 86 | 96 |
| Bicycle Casino | 134 | 309 |
| Foxwoods | 89 | 313 |
| Bellagio | 146 | 314 |
| Gold Strike | 160 | 367 |
| Commerce Casino | 136 | 382 |
| Party Poker | 177 | 546* |
| Reno Hilton | 87 | 342 |
| Bellagio** | 111 | 342 |
Source: WPTFan.com and Lakes Entertainment.
*Buy-in increased.
**WPT Championship ($25,000 buy-in).
So where does an investor looking to capitalize on this trend go?
You might look at MTR Gaming (NASDAQ:MNTG), the former TMF Select (now Hidden Gems) pick, which now owns the casino where the WSOP was held this year, though perhaps for the last time. A better bet might be Harrah's Entertainment (NYSE:HET), which owns the rights to the tournament. Harrah's is in the process of reopening some of the poker rooms it had previously closed at its casinos around the country.
A similar argument can be made for MGM Mirage (NYSE:MGG), which boasts the poker rooms at Bellagio and The Mirage on the Las Vegas Strip, as well as the Borgata in Atlantic City. Count Boyd Gaming (NYSE:BYD) in as well, which owns half of Borgata and runs the operation. Boyd can also flaunt Coast Casinos' The Orleans in Las Vegas, which is known for its everyday poker tournaments.
The problem is that any boost from poker alone will be marginal, because poker rooms in general are marginally profitable at best -- at least compared to slot machines (which is why they were removed at most casinos around the country to begin with).
We've also talked in depth about casino operator Lakes Entertainment (NASDAQ:LACO), which owns approximately 80% of the WPT. However, I'd be cautious. This time last year, Lakes' stock made a great value play, trading at a fraction of book value. But today, you'd be gambling on a growth story with lots of questions (see Setbacks for Lakes Entertainment).
Most of Lakes' value is tied to its Native American-owned casino development and management business, which currently consists of a few projects and zero existing casinos. The World Poker Tour does carry sponsorships from such companies as Anheuser-Busch (NYSE:BUD), and its upcoming initial public offering (IPO) will make it the only real pure play on poker.
So, as an investor, the safest poker plays are the casinos, which also carry the most marginal benefit. That leaves Lakes' IPO of the World Poker Tour, which is the most marginal play, but probably with the greatest upside from poker's growth alone.
If you do choose to look that way, be sure to check out my other coverage:
- Setbacks for Lakes Entertainment
- Lakes Goes "All In"
- A Red Flag Over Lakes
- Liquidity Split
- Red-Hot Poker
- Betting the World Poker Tour
Discuss your poker game on the On Tilt discussion board -- only at Fool.com.
Fool contributor Jeff Hwang owns shares of Lakes Entertainment and Anheuser-Busch.
