Continuation from yesterday……TECHNICAL ANALYSIS

Since the fundamental analysis has failed to yield any sort of a buy signal for Bally’s stock in 1999-2000 we must now concentrate on the technical side of the equation.

As the chart above shows, between 1993 and 2000 the company’s stock collapsed from $34 a share to less than $0.50 a share.  What’s more, this substantial down move had occurred during one of the strongest bull markets in history.

Unfortunately, outside of dropping 99%, Bally’s stock gave us very few clear technical clues that it would either top out in 1993 or bottom out in 2000. Outside of a clearly defined downtrend between October of 1993 and 1999-2000, we have very little to go by. As was mentioned earlier, by 2000 Bally’s fundamental and stock price performance has gotten so bad that it received a number of delisting warnings/notices from the Nasdaq. In other words, any analyst looking at this stock and the company’s fundamental performance at the time would have assumed that the Bally’s stock would be delisted. Ending up in the pits of OTC trading.

Yet, despite the setbacks Bally’s stock price bottomed at $0.42 in May of 2000 and then went on to appreciate to $34 by April of 2004. An 8,000% gain in less than 4 years.  Unfortunately, the stock itself gave us very few technical clues that it was about to stage a massive multiyear rally. In fact, it wasn’t until March of 2001 that we would have gotten our first real technical confirmation that the Bally’s stock price might be going through something more than a simple bounce. By that time the stock was already selling at $3 a share.  While an entry at that point would have still resulted in a 10-20 bag run over a 5-13 year period of time, such performance would have been far below our anticipated threshold.

In conclusion, technical analysis alone would have failed in giving us a clear buy signal anywhere close to our anticipated entry point of $0.50-1.00 a share in the second half of 2000. There were NO clear technical signs that Bally’s stock price was about to stage an 8,000% rally or a rally of any kind. Perhaps we will have better luck with our timing and mathematical analysis.

TIMING & MATHEMATICAL ANALYSIS: 

To Be Continued Tomorrow……

No Love From Bally’s Google

Continuation from yesterday……As we begin to analyze the company in the 1990’s we immediately realize just how out of shape and dysfunctional the company was at the time. On many different levels.  For instance, the company was involved in so many different businesses or lines of business that it would have been virtually impossible for anyone to truly understand their operations.  From developing slot machines and gaming systems to operating river boat casinos, from international partnerships to running their own slot machine route operations. And the list goes on.  In short, it would have been impossible to fully comprehend, let alone analyze the company from the fundamental perspective alone.

Part of the problem stemmed from the company’s mismanagement in the past and number of acquisitions/takeovers the company went through in the 1990’s. So much so that by 2000 Bally’s stock was on the brink of being delisted from Nasdaq. Hence the low price. Yet, by the end of 2002 the company was earning record revenues and profits and was even able to move from the Nasdaq to the New York Stock Exchange.

What had caused such an improvement in operations?

A turnaround of sorts. The company began to consolidate its business lines and divest non-core assets. Selling a number of properties and businesses in the process, raising additional cash and paying off debt. Further, the company refocused on technology and slot machine, introducing a number of popular products throughout 2000’s. Today, Bally Technologies has a much simpler structure and business. Deriving all of their revenue from just three lines of business, gaming equipment (34%), gaming operations (41%) and systems (25%).

If we analyze the company during the 1999-2000 period, unfortunately, we would have been unable  to predict that the company would A. Begin its turnaround efforts  B. Start consolidating and selling off assets  and C. Be successful.  In fact, after pouring over company’s records and financial statements during that time I have yet to find one management discussion alluding to the fact the company will attempt a turnaround.

In other words, it would have been impossible to predict the company’s turnaround from the fundamental perspective alone for the following reasons.

• The company’s structure was too complicated.
• Financial mismanagement and a heavy debt load
• The company was on the verge of a financial collapse.
• No discussion of any turnaround attempt by the company’s management.
• No discussion of consolidation and asset divestiture.

The question becomes, would investors be able to forecast such changes on their own?

Absolutely NOT.

The fundamental developments above could not have been anticipated nor predicted. Particularly when the management of the company did not talk about them in advance.  And while we could have assumed the company would have instituted additional turnaround steps, we would have no way of knowing if they would actually work and to what an extent they would go. Forcing us to make an investment decision on hope alone. An unacceptable way to approach any sort of an investment decision.  Perhaps technical analysis can offer us a better answer.

To Be Continued Tomorrow……

What A Real Gamble Looks Like  Google

Continuation from Friday…..

FUNDAMENTAL ANALYSIS:

In order to establish a clear picture of what had happened between 1999 and today we must first analyze the fundamental growth of the company over the last 15 years.

As we look at the data above, one issue becomes immediately apparent.  Just how much out of shape the company was back in 2000. And not just in 2000, between 1996 and 2000 the company lost a net total of $170 Million. A massive loss considering the company had a debt load of $354 Million, negative equity and a market capitalization of just $39 Million. In other words, at least from the financial statements perspective alone, the company was dying.

Further, while Bally’s financial performance had improved considerably between 2000 and 2014, this improved performance hardly justifies the 7,800% rise in its stock price.  With the revenue base growing at just 138% over a 14 year period of time and with the shareholders equity expanding by just $170 Million, it becomes puzzling how Bally’s market capitalization could have expanded from $39 Million to $3 Billion. Finally, while the company was selling at depressed valuation levels throughout 1999 and 2000, with a Price/Sales ratio of 0.08, it not entirely evident if this simple turnaround is what had caused the company’s stock price to expand by 78 bags

We must now go back into the 1995-2000 period and study the company in greater detail in order to determine why the company was underperforming,  losing money and on a verge of a financial collapse during that time. Further, we must ascertain what the company did between 2000 and today in order to turn things around. If this improved performance could have been anticipated. Most importantly, we have to figure out if we would have been smart enough to take a long position in either 1999 or 2000.

To Be Continued Tomorrow…..

How You Could Have Made A Fortune Gambling  Google

Company Description: Bally Technologies, Inc. is a diversified, worldwide gaming company that innovates, designs, manufactures, operates, and distributes advanced technology-based gaming devices and systems, as well as interactive and mobile solutions.  As a global gaming-systems provider, we offer technology solutions which provide gaming operators with a wide range of marketing, data management and analysis, accounting, player tracking, security, and other software applications and tools to more effectively manage their operations.  Our primary hardware technologies include spinning-reel and video gaming devices, specialty gaming devices and wide-area progressive systems for traditional land-based, riverboat, and Native American casinos, video lottery and central determination markets, and specialized system-based hardware products.

Quick Trading Overview & Objective: While Bally Technology’s stock price has appreciated only a little over 300% since first going public in 1982, we will begin our analysis at a multi decade bottom that had occurred in 1999-2000.  Bally’s stock price hit bottom in May of 2000 at around $0.42 a share before staging an impressive 20,000% rally (a 200 bagger) between then and the January of 2014.  We will initiate our coverage at this 1999-2000 bottom of around $0.40-0.50 a share (split adjusted) in order to see what had caused the company to appreciate over 7,800% between 2000s tradable bottom and today.

We will go back in time and take an in depth look at the company in order to determine if we could have taken a long position at that time. More importantly, we will look at Bally’s fundamental and trading patterns over that period of time in order to ascertain if we would have been able to maintain our position over a 14 year period of time and/or until the takeover bid for Bally’s Technologies was announced on August 1st, 2014 by Scientific Games Corporation at $83.30 a share.

To Be Continued On Monday…….. 

Let’s Play A Game Google