Atlantic City Casino Data Weigh on Trump

Editor's note: "Bricks and Mortar" is a mock portfolio created by Senior Writer Nicholas Yulico that is meant to help generate real estate and gaming-related stock ideas. In keeping with TSC's editorial policy, Yulico doesn't own or short individual stocks.

The Atlantic City casino market remains a mess, with gaming revenues falling 10% at the city's casinos in March from a year earlier.

The dismal report, released Thursday, sent shares of Trump Entertainment (TRMP Quote) down 9% to $3.14 in afternoon trading. Trump is a stock I've flagged as overvalued in the Bricks and Mortar portfolio.

Revenue fell 6.3% at Trump Marina, dropped 4.1% at Trump Taj Mahal and fell 2.2% at Trump Plaza. The results, however, weren't as severe as the overall market's 10% decline and the 13.4% revenue drop at the Borgata Hotel Casino, which is jointly owned by MGM Mirage (MGM Quote) and Boyd Gaming (BYD Quote) and is considered the best property in the market.

For the past year, Atlantic City has been under intense competition to attract gambling players with nearby Pennsylvania, which legalized slots parlors. The implementation of a partial smoking ban in New Jersey is also hurting the market.

I continue to recommend investors should avoid buying Trump shares, as the lack of near-term cash flow growth and hefty debt burdens leave little value for equity holders.

The stock also will continue to remain volatile because of hedge fund trading in the name. According to Goldman Sachs research, about 18% of Trump shares are owned by hedge funds -- the fourth largest percentage among casino stocks. The stock also has a short interest amounting to 26% of the float.

Progressive Gaming (PGIC Quote), Multimedia Games (MGAM Quote) and Bally Technologies (BYI Quote) have the most hedge fund ownership (at 32%, 31%, 25% respectively, according to Goldman.)

Bricks and Mortar Portfolio A Look at How Nicholas Yulico's Picks Have Performed
	Rating Date	Price at Rating	Rating	Current Price*	Total Return**	year end 07 price	2008 YTD Return
Brookfield Properties (BPO)	1/23/2007	28.67	Own	19.47	-32.1%	19.25	1.1%
Global Real Estate ETF (RWX)	1/23/2007	64.00	Own	53.72	-16.1%	56.95	-5.7%
Ryland (RYL)	1/23/2007	56.00	Flag	33.49	40.2%	27.41	-22.2%
Trump (TRMP)	1/23/2007	17.50	Flag	3.45	80.3%	4.30	19.8%
Penn National (PENN)	2/6/2007	45.56	Own	42.64	-6.4%	59.55	-28.4%
Melco PBL (MPEL)	3/12/2007	15.46	Own	13.42	-13.2%	11.56	16.1%
Starwood Hotels (HOT)	7/12/2007	72.37	Own	49.35	-31.8%	44.03	12.1%
Home Depot (HD)	1/30/2008	29.71	Own	27.67	-6.9%		-6.9%
Pulte Homes	1/31/2008	16.35	Flag	14.01	14.3%		14.3%
Average Total Portfolio Return, Unweighted, (including closed ratings)					16.8%		3.5%
Closed Ratings	Rating Date	Price at Rating	Rating	Closing Price***	Return**
Hilton (HLT)	3/2/2007	34.69	Own	47.50	36.9%
Home Solutions of America (HSOA)	4/24/2007	4.98	Flag	1.06	78.7%
Standard Pacific (SPF)	10/26/2007	5.25	Flag	2.20	58.1%	3.35	34.3%
	Close At Start of Portfolio			Current Value*
S&P 500	1427.99			1,354.49	-5.1%	1468.36	-7.8%
U.S. MSCI REIT Index	1140.36			896.39	-21.4%	870.64	3.0%
*(4/9/08 closing prices) **For "flagged" stocks, a drop in price is tracked as a positive for the portfolio, and a rise in price is a negative. ***Hilton closed out of portfolio on 10/26/07 because Blackstone Group completed purchase of firm. HSOA closed out of portfolio on 12/26/07 at day's closing price SPF closed out of portfolio on 1/11/07 at day's closing price