Finding Video Game Profits

Jun 4th, 2008 | By Penny Sleuth Contributor | Category: Technology

Typically, when investors hear “pink sheet stocks,” they think of tiny companies, more often bad than good, and for the analysts out there, it means a ton of work lies ahead of them. It’s infinitely harder to dig up information on small cap, thinly traded companies than it is for stocks that trade on the big board or the NASDAQ.

But what if I told you I was looking at a bulletin board stock that had:

A $76 billion market cap
Was the leader in its industry
Has been breaking new highs all year
AND could be the buy of the year!

Well, that’s EXACTLY what I’m saying to you today.

When many people think about video games they tend to say, “Oh, that’s just kid’s stuff.” But I bet those are the same people who didn’t know that a game released only several short weeks ago — Grand Theft Auto IV — did more sales in one week ($500 million+) than Spider Man 3!

This Isn’t Kid’s Stuff Anymore

Now please understand, I’m not the biggest gamer in the world. I’ll play some quick computer games once in a while and I’m addicted to Brick Breaker (game on my Black Berry), but I’ve never gotten into some of the bigger gaming trends like World of Warcraft, etc.

That is until I received the Nintendo Wii as a gift last summer.

And that’s why when I saw this question on TickerHound, I just had to write this article:

“Which video game stocks would you buy right now?”

Until I played the Wii I wouldn’t have given this topic a second thought. It just wasn’t an industry I was into, even though it was pretty clear that something big was happening here.

But after seeing the Wii in action and watching how friends and family — many of which have NEVER played video games before — got into playing with the system so much, I knew there was an opportunity here.

So I started to dig deeper into Nintendo’s stock and to my surprise the Japanese company had never done a public offering here in the States. Sure, the stock trades under the symbol: NTDOY, but it’s traded on the OTC bulletin board.

In fact, only five years ago this company was trading under $10 per share — today, it’s over $67! That’s a 635% profit for the patient investors out there who had the savvy to buy and hold Nintendo stock.

So Where’s the Opportunity Today?

Like I said, Nintendo’s new gaming console, the Nintendo Wii, is blowing the doors off the gaming industry right now.

In April 2008, the company sold more consoles than its top two competitors combined: Sony’s (SNE: NYSE) PlayStation and Microsoft’s (MSFT: NASDAQ) Xbox.

Not only that, but Nintendo is continuing to release games and pursue a strategy that isn’t solely directed at the typical gaming market, boys and young men. This company is going after women and seniors as well which is opening up some major opportunities for growth in the years to come.

The stock is pulling back a bit right now but I’d be a buyer as soon as it starts to move to the upside again.

Regards,

Wayne Mulligan
June 4, 2008

Editor’s Note: We track companies like this all the time. Greg Guenthner and I recently found a much smaller one that is really set to explode.

Penny Sleuth Contributor

The Penny Sleuth also features commentary by other financial analysts, small-cap experts, investment gurus and an array of contributors from various fields and occupations. Their diverse insights and contrarian investing ideas are hand selected by the Penny Sleuth editors.

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