Shuffle Master's Dominant Market Share Should Not Be Overlooked

Shuffle Master Inc. (SHFL) has become then newest addition to our portfolio as the stock is trading at extremely attractive levels.

Shuffle Master focuses on providing casinos with a variety of gaming equipment including chip sorting devices, table games, and most notably automatic card shufflers. The stock took a hit about a month ago after a disappointing earnings report.

The company reported net income of $2.47 million, or 8 cents a share on revenue of $45.1 million. These numbers missed analysts' expectations on both the top and bottom line with forecasted earnings of 13 cents a share on revenue of $46 million. Although revenue may have been a tad shy, the lower earnings figure can be attributed to the number of acquisitions the company has made recently. We feel that this drop in stock price presents a great buying opportunity as most of the negative news has now been priced in, and the future prospects of the company remain solid.

Over the last few months, investors have se, which has become relatively saturated. However, with the company's 90% market share on automatic card shufflers, it has become a compelling play on the widespread growth in the international gaming industry.

Most notably, the dramatic growth in Macau, China places SHFL in a position to benefit from the number of casinos expected to open there soon. Also, with Chinese casinos being dominated by table games, Shuffle Master is poised to be rewarded handsomely.

We are strong buyers up to $14, and will continue to add to the position with any further dips in the stock.

Disclosure: Author has a long position in SHFL