After Penn, Where Lies the Next Takeover Bet?

Penn National Gaming(PENN) was among the Nasdaq's biggest winners Friday, as the casino and race track operator shot up more than 21% after agreeing to a buyout.

Fortress Investment Group(FIG) and Centerbridge Partners agreed to pay $67 a share for the company. That $8.9 billion deal is old news now, however. We want to find out who is next.

Penn is part of two interesting racetrack portfolios that could offer more takeover targets as the gaming and horse-racing industries consolidate:

• Stockerblog's Horse Racing Stocks
• Freakonomics Horse Racing Stocks

For instance, there is Dover Downs Gaming & Entertainment(DDE), a stock that's named in both portfolios.

The Dover, Del., company offers a forward price-to-earnings ratio of 16, vs. 28 for competitor Churchill Downs(CHDN). Dover's 2% dividend yield and its short ratio of 11 also make for an interesting profile.

The short ratio refers to the number of days it would take short-sellers to cover their short positions if the stock were to start rising. With a short ratio of 11, it becomes nearly impossible for short-sellers to cover their shares without taking a significant loss. This is what could lead to a short squeeze.

Each month we update the Top 10 Short Squeezes, a list of stocks with the highest short ratios as well as significant insider buying. Among the stocks on the most recent list is PW Eagle(PWEI).

Penn is also a holding in the Vice Fund (VICEX) portfolio. The fund's official profile makes no apologies: "The fund normally invests at least 80% of net assets in equity securities of companies that derive a significant portion of their revenues from products often considered socially irresponsible."