Casino Stocks: 'Lucky 7' Picks & Pans?

It’s been a volatile year for casino stocks, but the S&P gaming and casino index is up 55 percent year to date. So should investors bet on gaming stocks in the new year? Robert LaFleur, gaming, lodging and leisure analyst at Susquehanna Financial Group, and Joseph Graff, senior hotel and gaming analyst at JPMorgan, shared their stock picks and pans.

“We think the international story is better—Las Vegas is going to have another difficult year,” he said.

“So we don’t like companies like MGM—we have a sell rating on that company.”

LaFleur likes smaller companies such as WMS Industries and Isle of Capri Casinos.

Wynn Resorts "is very diversified with the Macau and Las Vegas presence, it’s very well balanced and well run, but it’s a little expensive for us,” he said. “We have a hold rating on it.”

In the meantime, Graff said he expects Macau’s casino industry to grow 15 to 20 percent next year.

“A lot of the movement in the stocks this year is [due to] the removal of bankruptcy risk, improving the balance sheet and the removal of the worst-case scenario where consumers don’t go to casinos or don’t spend anything in casinos,” he said.

Graff said he expects to see an uptick in casino traffic as the unemployment situation improves in 2010.

Graff likes Las Vegas Sands, International Game Tech. , and Penn National Gaming.

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JPMorgan makes a market in Penn National.

No immediate information was available for LaFleur or his firm.