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Internet Gaming Stocks

Written By Brian Hicks

Posted March 3, 2009

What Skyrockets On No News… Must Come Down!

It was early last month when a tiny biotech company began its big move, doubling in value in just two short weeks.

And novice investors from coast to coast took the bait.

Truth to told, the stock was running too early, its share price ascending on news that’s not expected until the last week of March 2009.

Bulls didn’t care… They continued to buy, despite our repeated warnings of a fall.
We knew once that stock reached its upper Bollinger Band — again, on no news — it was only a matter of time before profit takers took the stock to more sustainable, lower levels. So it wasn’t a big surprise when UBS agreed, downgrading the stock a day later, based on risks for negative outcome in late March.

My team and I watched intently as bullish investors jumped the gun, sending shares of this small cap stock up more than 100% in mere days. But as I said, once it touched the upper Bollinger Band, it was all over.

It was the right play at the right time… and our readers cashed in. 

You see, the stock swan dived like we predicted, leaving our readers with gains of more than 28% in days.

But we’d be foolish not to play the long side of this gem, too… as we head into March 30 Phase III news that could catapult this small stock to $10 in short order… seeing just how explosive its market really is.

You see, at any given time, it’s estimated that 70 million Americans are trying to lose weight, and spending billions to do so. Imagine if this $480 million company were to tap that market? It’d never see the single-digits again.

Sure, there are three obesity drugs on market right now. But none of them are blockbuster drug-worthy and carry severe side effects. Xenical, for one, may block fat absorption, but carries severe gastro side effects. There’s also Meridia, but it can’t be prescribed to those with hypertension or a heart problem, conditions which effect obese individuals.

There was also the pulled Redux/Phen-Fen, which was removed from market because of associations with cardiovascular problems, "worked by non-selective stimulation of both central and peripheral 5-HT2B receptors."

But now we have this new drug which works by stimulating the hypothalamus which affects "fullness" (or satiety) and metabolic rate. Its goal: to produce a minimum 5% loss of body weight for patients taking the drug.

Naturally, any oral drug that can help people shed unwanted weight and have minimal side effects is going to be huge. The opportunity for the company could easily be worth more than $5 billion to $10 billion a year in sales… easily.

"Looks like Cooper was right," commented one reader in an investor forum my colleague, Steve Christ, sent me this morning.

Of course, we’re not done with this one yet… but we’re already on to the next one.

And we’re going big with this one. In fact, if you act before March 31, you could be looking at a double-play jackpot.

Here’s what I’m getting at…

We recently released a twin-trade play to our Small Cap Trading Pit readers… one that could produce an easy double… even triple the return.

It centers on legislation passed in late 2006 that was supposed to put the clamps on online gambling in the U.S. (by prohibiting businesses from accepting funds tied to unlawful Internet gambling).

Of course, they got the Unlawful Internet Gambling Enforcement Act (UIGEA) all wrong… and now there’s some serious momentum behind overturning it, immediately.

Why? Because by reversing this three-year-old ban on internet gambling, the U.S. government could raise nearly $52 billion in revenue over the next 10 years, according to a PricewaterhouseCoopers study.

And the two companies that stand to profit the most are already locked into our Small Cap Trading Pit portfolio.

The rise in Internet gambling over the last few years almost assures this trade’s success.

Ban It, and They Will Come

In fact, the study’s latest $52 billion estimate on U.S. tax revenue from internet gambling is a full 22% higher than its estimate in 2007… based entirely on the rapid growth in U.S. online gambling—despite the ban!

…Which is why House Financial Services Committee Chairman Barney Frank is about to reintroduce this bill, effectively countering the UIGEA. (It’s a revised version of Franks’ 2007 Internet Gambling Regulation & Enforcement Act, which failed to make it to the House despite attracting support for the measure.)

According to the Financial Times, Frank wants to "reintroduce a bill in the next few weeks to establish a licensing and regulatory framework for online gambling operators." 

Here’s more from the Financial Times:

"…The tide has shifted: this year is set to mark the moment when gambling online reaches a measure of acceptance and respectability its detractors on both sides of the Atlantic have long fought to prevent." 

And, according to Poker News, Franks expressed belief to the Financial Times that the "chances for the new legislation to become law to be much better than had been the case for the IGREA, both because of the change in administration as well as ‘because public opinion [is] demanding the right to gamble online.’"

And that’s why the time to buy these two stocks is now.

Once Frank introduces the bill, speculation could at least double these stocks in short order. Just imagine what could happen if a counter UIGEA bill was successful.

We’ll be publishing a full report on this new development next week. But if you’re ready to jump on these two trades before the herd gets ahold of them, just follow this link to the Small Cap Trading Pit

Good Investing,

Ian L. Cooper