Should you gamble on casinos?

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Although we presume that many consumers might increasingly be willing to gamble in a slumping economy, Reuters reports that lottery sales are down by as much as 10 percent in some states, and casino resorts will struggle during this period of economic uncertainty due to dwindling numbers of visitors and a punishing credit environment, says Ken Herbert of research and consulting firm Frost & Sullivan. Further, many large-scale casino construction projects in Las Vegas were halted or scrapped due to difficulties getting loans, Herbert says.

Add to that the massive expansion of resorts “creating an overcapacity in gaming,” says Jack A. Bass, editor of “Apprentice Millionaire Market Letter.” These forces combined to drag down the gaming sector, including Las Vegas Sands (NYSE: LVS; Price: $5.31) and Wynn Resorts (NASDAQ: WYNN; Price: $43.97), he says.

Sean P. Smith, an analyst at Zacks Investment Research, advises you to hold on to Monarch Casino & Resort (NASDAQ: MCRI; Price: $10.54), a shift from the firm’s “buy” recommendation in February 2008. If you’re itching to bet on something, he rates Churchill Downs (NASDAQ: CHDN; Price: $35.84) a “buy.” Smith is encouraged by Churchill Downs’ online advance-deposit wagering business and its growth in the alternative-gaming segment.