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“If you must play, decide upon three things at the start: the rules of the game, the stakes, and the quitting time.” No one understands this proverb better than Carl Icahn, billionaire investor, who built a track record turning undervalued and/or underperforming assets into money makers. Moreover, Mr. Icahn has proven adept at reading the market. In one recent exploit, he sold off casino interests in Las Vegas (which netted him $1.3 billion, or nearly a $1 billion profit) just before the recent recession engulfed the U.S. gaming industry.

What has this astute investor been up to recently? Mr. Icahn has been collecting casino properties ravaged by earlier economic setbacks. First, the takeover specialist won an auction for Tropicana Entertainment LLC, the bankrupt owner of nine properties in five states including New Jersey and Las Vegas. The $200 million buyout represented an 80% discount from the $1 billion Tropicana was valued at in 2008. Subsequently, Mr. Icahn also took over the bankrupt and unfinished Fontainebleau resort in Las Vegas for the relative bargain of $150 million. Previous ownership had spent $2 billion (of the $3-billion proposed project) on construction before it defaulted on obligations.

Could Mr. Icahn’s interests in New Jersey and Las Vegas suggest better days are ahead for those gaming markets? Moreover, was speculation about Atlantic City’s demise (due to competition from casinos in Pennsylvania ) premature?

A confluence of factors including the recession, a citywide smoking ban, numerous dilapidated properties, as well as the legalization of gaming in Pennsylvania, diverted patrons from Atlantic City. These dire circumstances have led local leaders to contemplate measures to revitalize the once-booming destination. Though the city has yet to come up with a plan, an eventual course of action will likely aim to stimulate investments in new entertainment, retail, dining, and convention facilities. Ultimately, success in attracting a broader spectrum of patrons will dictate the future of casinos in Atlantic City and the success of initiatives undertaken by Mr. Icahn’s management team at Tropicana.

A rebound in Las Vegas, though not assured, is more likely because of the destination’s premier convention, entertainment, and dining offerings. Thus, Sin City’s grandiose resorts should again attract corporate and leisure travelers in droves, once businesses and consumers regain their footing. Mr. Icahn has not disclosed his intentions for the Fontainebleau resort, but the most likely outcome would be to spend money to complete certain aspects of the project. Under another scenario, the property would be left dormant, for now, since the completion of the Fontainebleau would bring additional lodging, gaming, retail, and convention offerings at an inauspicious time. Moreover, the return on capital would not justify the investment, at least in the short term. Thus, Mr. Icahn may well put the project on ice until the economy improves.

Clearly, Mr. Icahn is betting patrons will eventually return to casinos. After all, “man is a gambling animal. He must always be trying to get the better in something or other.” Investors buoyed by Carl Icahn’s belief that the U.S. gaming industry will eventually bounce back, and want to tag along, have a number of investment alternatives.

Boyd Gaming Corporation (BYD) owns and operates 15 gaming entertainment properties in Nevada, Mississippi, Illinois, Indiana, and Louisiana. Construction of a tenth location in Nevada, however, has been halted. It would have been the company’s first on the Las Vegas Strip. Construction on the project is expected to resume in 3 to 5 years. The company has multiple properties in Las Vegas that are “off” the strip. Boyd’s main exposure to Atlantic City is a 50% stake in the Borgata Hotel Casino & Spa. This casino and hotel is the most valuable resort in Atlantic City and a major draw. Should the market pick up, this property is likely to perform better than many of the other, older casinos.

Meanwhile, we also like the upside offered by MGM Mirage (MGM). MGM, Las Vegas’ biggest by market share, owns and operates 15 properties in Nevada, Mississippi, and Michigan. It also has 50% investments in four other properties in Nevada, Illinois, and Macau (China). One of those joint ventures is the $11 billion CityCenter in Las Vegas with Infinity World Development Corporation (a subsidiary of Dubai World). This gaming giant generates a considerable portion of business from patrons residing in economically challenged states (California and Arizona). Thus, a revival in those local economies should enable MGM to experience a rebound in profitability.

Last, but not least, we recommend investors review Las Vegas Sands (LVS). The gaming operator owns two casino resorts and The Sands Expo & Convention Center in Las Vegas and one casino in Pennsylvania. In Asia, the company boasts three properties on the “Cotai Strip” in Macau, China (the world’s biggest gaming market by revenue) and one in Singapore. Additionally, it is developing a slew of integrated resort properties in Macau. Las Vegas Sands derives a significant portion of its business from conventions, business meetings, and group bookings. Accordingly, the ongoing revival in corporate spending augurs well for the company.