Off to the 'Racinos'

Off to the 'Racinos'

When state governments have budget problems, they usually try to shaft the poor, said Cramer, but higher taxes and budget cuts are not politically palatable.

So to reach into the slim pocketbooks of people without money, politicians will turn to state-sanctioned gambling, he said.

That's why he believes racinos, combination racetracks and casinos where the gambling is usually limited to slot machines, are the wave of the future.

States can take up to 52% of profits from slots, he said. And with about 30 states experiencing budgetary shortfalls and 10 to 15 states expected to pass pro-racino legislation, Cramer sees room for growth.

 That's why he said to consider International Game Technology (IGT:NYSE - commentary - research - Cramer's Take), which has 70% of the slot machine market.

He believes that as the number of racinos grows, the real racino money will go to International Game Technology.

Plus, there are 830,000 slot machines that will someday need to be replaced, Cramer said, with 145,000 replacements worldwide expected in 2006. And he said that International Game will reap the rewards from the replacement cycle, too.