weiwentg (98.29)

Some thougts on International Game Tech (IGT)

October 20, 2007 – Comments (1)

First, I own the stock, and have picked it in CAPS as well. I think that IGT is going to face some increased competition, and that its stock price will be vulnerable to its lumpy sales. However, this company has a pretty large R&D advantage over its competitors, generates a lot of cash, and is going to continue to face demand worldwide (people will always gamble). I think IGT will generate a lot of wealth going forward.

Interestingly enough, IGT is a holding in the Sierra Club Stock Fund and the Sierra Club Equity Income fund. both are rather expensive (partly due to small size), and haven't had great performance, so I'd stay away. however, unlike most SRI funds, they don't screen out gambling stocks. they own several casino stocks, and IGT.

My had a friend who took gambling a bit too far. he won several million dollars once, which is I assume why the casinos let him keep playing. we all know the odds are generally stacked in favor of the casino. indeed, this friend lost what he won, and ended up several million dollars in the hole. and then he committed suicide; I think he checked into a high-rise hotel and jumped. He did leave a wife behind.

So, should I own gambling stocks? The casinos do all sorts of subtle psychological manipulations to get you to gamble more and more; there's an article on that somewhere in the Motley Fool archives. Buffett and Munger said that gambling was a dirty business, and that they wouldn't invest.

Now, I've previously replied, yes, it's a dirty business, but genocide is even dirtier. Petrochina isn't the Janjaweed, sure, but they provide funds to the Sudanese government, which funds the militia. International Game Tech provides slot machines to casinos. you see the parallel. You could argue that Petrochina is one more step removed from the genocide than IGT is from the gambling, and this is sufficient. however, there is substantial evidence that the Sudanese government funds and supports the militias. and besides, we're talking about genocide. 

 well, I intend to continue to hold my IGT stock. I also hold Diageo stock. I think that gambling and alcohol are relatively resistable addictions. everyone's entitled to the odd game of chance, or the occasional drink. I know Altria has also been a huge wealth creator, but tobacco is highly addictive, and tobacco companies have acted horrendously in obscuring the truth about tobacco, and in lobbying to get the laws written their own way; for example, in some states, the tobacco companies lobbied for pre-emption laws that would prohibit local control of smoking, i.e. if the city of Ann Arbor wanted to ban smoking, it couldn't, because Michigan has a pre-emption law. Although this isn't as bad as genocide, these acts are utterly repulsive, and I will own no Altria stock.

But, there's no guarantee the gaming industry won't turn to such repulsive acts if gambling becomes a greater problem. I hope I'd have the discipline to sell my IGT stock if something like that happened. in the meantime, I'll continue to hold it, with reservations.