BUSINESSWEEK ONLINE : SEPTEMBER 28, 1998 ISSUE
INSIDE WALL STREET

Penn National May Romp Home

If the NASDAQ-traded stock of Penn National Gaming (PENN) were a racehorse, it wouldn't be in the winner's circle--or even at the starting gate. It would be writhing on the ground with a severe case of colic. Penn owns and operates racetracks and offtrack betting facilities: Charles Town Races in West Virginia, as well as Pocono Downs Harness Racetrack and Penn National Race Course in Pennsylvania.

Gambling stocks, especially those of racetracks, have been trampled by the market. Penn has been a dreary also-ran, with its shares falling 32% this year, to 6 5/8 recently, down from 20 a year ago. And its market capitalization has fallen to $100 million--for a company whose quarterly earnings and revenues have been rising handsomely.

One small-cap investor, at least, thinks Penn National is a winner. Chuck Akre, who runs FBR Small-Cap Value Fund in Arlington, Va., feels that the market has been excessively cruel to Penn National. He notes that mutual-fund selling has depressed the share prices to the point that the stock is now a bargain.

Akre notes that earnings are healthy and that the company is flush with cash. Earnings before interest, taxes, depreciation, and amortization rose 42%, to $7.2 million, in the quarter ended June 30, up from $5 million in the like period a year ago. Akre believes that the stock will double in the year ahead.
BY GARY WEISS

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