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catoismymotor (40.16)

Lakes Entertainment, Inc. Oh, what to do?

Recs

11

December 07, 2010 – Comments (9) | RELATED TICKERS: LACO

Okay, I've been studying this one for a couple of days. I like what I see. I really do! But I think an unhealthy amount of my enthusiasm may be leaning on speculation.

I like the book value, the cash on hand, the share price, the profit margin, the YOY and the amount of debt it carries. The speculation aspect has to do with how fast this company will turn around. I have to admit I'm looking for a company that could go up 25%-50% a year for two or three years. For some demented reason a part of my brain can't be convinced LACO is not such a company.

I need some help with this one. What is your opinion?

9 Comments – Post Your Own

#1) On December 07, 2010 at 11:51 PM, Mary953 (73.63) wrote:

My opinion is that I am hopeless at the type of stock advice you are asking about, but I could not resist the chance to say hi to one of my very favorite Fools!

Merry Christmas

 

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#2) On December 08, 2010 at 12:24 AM, HarryCarysGhost (99.70) wrote:

This ticker is not currently Ratable.

Tried putting in a limit of $2- No dice.

Wow this is tricky, from my experience people that frequent Indian Casinos, are usually the ones making more then $250,000 a yr.

So with the tax cuts in place you might be on to something.

And a Merry Christmas from me also.

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#3) On December 08, 2010 at 1:34 AM, tekennedy (67.28) wrote:

At a quick glance this looks to be a good investment.  The company is trading for just over cash value, just became free cash flow positive and has plans for growth.  I'm going to look into this a bit further.

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#4) On December 08, 2010 at 9:04 AM, lemoneater (79.19) wrote:

Very nice to see you around, Cato. A rec for you, but not for your stock idea.

I wouldn't invest in a casino--the market itself is too close to gambling sometimes as it is!

Leaving the whole matter aside that I'm bothered how some people lose homes through gambling, I would consider pragmatic reasons not to invest in this pick. Some consider casinos recession proof. Even though I believe that we are experiencing a slow recovery from anecdotal observations (the local antique stores are having more booths and more foot traffic) I'm not sure that casinos are poised to benefit as well as other industries that are discretionary.  

Some have commercial real estate issues that severely cut into their profit margins. Over the top facilities can lead to over the top expense. (Are there any sleeping partners that need a cut of the profits before the shareholders get theirs. Too many mob stories, I imagine. But somehow casinos and organized crime were so cozy for so long it is hard for me to imagine there are no such relationships any more.) 

Also how dependent is it on the tourist trade? Does it really cater to the rich or to a different demographic altogether? Some people are going to cut air travel to a minimum and they may also cut driving if the gas goes too much higher. How dependent is it on locals? What bricks and mortar competitors does it have, and what online competition does it have?

I was surprised to discover how often casinos have the threat of bankruptcy over their heads. http://www.legalzoom.com/legal-headlines/celebrity-lawsuits/how-does-trump-repeatedly-file. Of course with Trump, I've suspected that some of what he does is from a sense of cinema. He has kept so many sensationalist reporters employed, it has probably made up for those who have lost their jobs from too much gambling.

You have greatly helped me in the past to think through my reasons for investing calmly. Your advice on PANL was right on and IPHS was a wonderful idea. Even better than your great stock advice is your friendship. You are kind to me even when we don't agree on an issue. You have proved that chivalry is not dead on the internet.  

Wishing you and yours peace and prosperity! Merry Christmas! (I may say it again, but there is no limit on good wishes :)

 

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#5) On December 08, 2010 at 6:21 PM, catoismymotor (40.16) wrote:

May953,

It is good to hear from you, too. Marry Christmas. I hope you and your family are well. And your input, no matter the topic, is always valuable.

 

HarryCarysGhost,

This one is tricky.Normally if I can't figure out this kind of puzzle I move on to something else. I still have some time before my next purchase. There is plenty of DD left to do.

Merry Christmas!

 

Tekennedy,

Please look into it a bit more. I am interested to learn what a second set of eyes can uncover.

 

Lemon,

I understand your thoughts. I would discourage a fellow Fool from investing in a tobacco company for many of the same reasons.

The idea of investing in casinos does not bother me. They are upfront about wanting you to play their games, lose your money, have a good time while doing it. I would sooner invest in WYNN than BAC. A bank will pick your pocket while a casino will charm you out of your money.

LACO also owns part of and manages casinos on tribals lands in the USA. When the casino does well, the tribe gets a cut of the money to put to work in the form of school construction, hospitals and payments made directly to its members. One could say in a tounge in cheek manner that LACO helps get even one nickel at a time.

Lemon thank you for giving me your point of view. I always appreciate your input, even when we don't see eye to eye. I hope that your garage conversion is treating you and your husband well. It is amazing how much space being "crafty" and working on photographic projects can take.

Merry Christmas!

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#6) On December 09, 2010 at 9:30 AM, lemoneater (79.19) wrote:

Cato, thanks for the good wishes. My husband and I both have three weeks off for Christmas break. I'm excited! Summer is my busiest season at my job so I usually take my "summer vacation" late.

Recently my husband got a Lensbaby so he has enjoyed the new "round" perspective he can get on pictures. He also wants to possibly try some old fashioned effects maybe some Cyanotype whatever he's in the mood for.

 

 

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#7) On December 09, 2010 at 9:40 AM, lemoneater (79.19) wrote:

I think that you might enjoy reading this blog when you have time.  

It is about sewing, photography, travel, genealogy, antiques and more photography:)

http://caps.fool.com/Blogs/foolanthropy-competition/481646

Have a great day!

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#8) On December 13, 2010 at 2:06 PM, tekennedy (67.28) wrote:

I got around to looking into this further.  I've got to say this will likely be a fairly risky investment despite having a market cap of $50 million and almost as much in cash.  From what it seems everything in their agreements favors the Indians:

-Their share of the earnings from each project is not only subordinated to significant debt but also to manditory minimum payments to the tribe.

-They can be bought out at low levels as each contract has a buy-out clause where their stake can be repurchased at the current years earnings times the number of years left in the contract.

Recent developments are less than stellar as well with the Iowa and Penn National gaming terminations.  The cancelation of the Iowa tribe project is particularly dissapointing as this was a long term deal and seemed to have good potential. 

With all conntracts having short lives the company will continuously need new deals.  These new deals entail considerable risk, including governmental delays (as shown by the delay of Jamul), inability to obtain financing, or construction delays or difficulties. 

Despite the stellar price the company trades for I'm going to take a pass.  This isn't to say this doesn't have the chance of being a multibagger in the next few years.  It's just that with no certainty in future prospects I am wary to take a bet on the company. 

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#9) On December 13, 2010 at 6:15 PM, catoismymotor (40.16) wrote:

tekennedy,

Thank you for sharing what you uncovered. I'll definitly take your contribution into consideration when the time comes to make my next purchase.

Cato

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