Is now the time to buy stocks although the bottom still may be half year away?

The old saying, which is getting a lot of use these days, as in every 30 seconds on CNBC, is that the stock market looks forward six months. So, if the economists predicting the recession will bottom in mid 2009 are correct, now is the time to buy stocks.

Admittedly, stocks look like bargains by a number of measures, but the recession may be deeper and longer than mid 2009.

Having said that, we still hold to our view that regional casino operators are the place to be as opposed to Las Vegas-centric companies.

Regional casino operators have several advantages:

• Most of their revenue, and nearly all of their profits, come from gaming. That is the recession resilient part of the business.

• Most regional casinos are not opulent pleasure palaces. They have lower cost structures than the Las Vegas mega resorts, and lower costs that can be reduced further without betraying the expectation of the exceptional experience that Las Vegas sells.

• Most of their customers are within driving range, meaning that many lost to high gasoline prices might be regained now that prices have fallen.

The Las Vegas Strip casinos have several challenges:

• Their business models have evolved towards expensive non-gaming amenities as profit centers. As such, every dollar a hotel room rate is lowered to draw players is nearly a dollar off the bottom line, for example.

• Cost structures are much higher, both operationally and in the big debt accumulated to build the mega resorts. And slashing costs could hurt more than help if customers believe they are not getting the expected resort experience.

• Most customers arrive by airline, and flight schedules and ticket prices will not return to 2007 levels as fast as gasoline prices, if they ever do.

• Competition is increasing to the point of risking a glut at the high end of the business already hurting by deep discounting. The number of hotel rooms added by Encore, CityCenter, Fontainebleau, and Caesars and Hard Rock expansions, will be a lot of rooms to absorb.

How they are absorbed is the subject of considerable speculation. Will resorts have higher vacancy rates than expected, or will they fill rooms at such steep discounts to damage their own bottom lines and those of older neighbors forced further down the food chain?

Those worries have savaged the stock prices of MGM Mirage and Las Vegas Sands. Wynn, seen more as a niche operator to the recession-resistant wealthy, has held up better than the others, and could come out ahead of the game if the niche theory proves true.

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

By Frank Fantini

Frank Fantini is the editor and publisher of Fantini’s Gaming Report. A free 30-day trial subscription is available by calling toll free: 1-866-683-4357 or online at www.gaminginvestments.com.

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