Schaeffer's Market Observation Features Argosy Gaming Company: AGY

Business Wire, April 26, 2004

Business Editors

CINCINNATI--(BUSINESS WIRE)--April 26, 2004

Today's Market Observation from Schaeffer's Investment Research features Argosy Gaming Company (NYSE:AGY). Market Observations are market-based reports that provide insight and analysis from a unique and unbiased perspective. These are published on www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. For additional information about this report or to have it delivered to you free via email every day click on the following link: http://www.schaeffersresearch.com/addinfo

Laying Argosy's Cards on the Table Ahead of Earnings

Argosy Gaming Company (NYSE:AGY) operates six large riverboat casinos, most of which are docked in the Midwest. Contained within the company's half-dozen gambling boats are almost 7,000 slot machines and about 230 table games, according to Hoover's. Tomorrow, AGY will prove if the house does, in fact, always win; the firm's first-quarter earnings report is due ahead of the opening bell. The consensus estimate of 16 brokerage firms currently calls for AGY to have earned 48 cents per share, a modest decline from the 50 cents earned the previous year. Zacks (www.Zacks.com) data indicates that AGY has had mixed results in the earnings confessional. Over the past five quarters, AGY has issued a positive earnings surprise on three occasions, disappointed the Street on one occasion, and matched analysts' expectations the remaining time.

The equity's technical picture is most impressive, as AGY shares have gained nearly 150 percent since the first quarter of 2003. Throughout most of its rally, the equity has found support in the form of its ascending 10-week and 20-week moving averages. AGY is fresh from a new 52-week peak of 37.87, achieved last Thursday.

Click the following link to see the Weekly Chart of AGY Since February 2003 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=9990

BigCharts.com data indicates that the Dow Jones Casinos Index (DJCNO), of which AGY is a member, is the third-best-performing sector so far this year, rising more than 22 percent since the beginning of 2004. Despite the sector's strength, AGY has managed to outperform the grouping of its peers for the past several months. The stock's weekly relative-strength measure took a sharp turn higher during the past couple of weeks following a retest of its 10-week moving average.

Click the following link to see the Weekly Relative Strength Chart of AGY Versus DJCNO Since December 2003 With 10-Week and 20-Week Moving Averages: http://www.schaeffersresearch.com/wire?ID=9990

What is always important to recognize from our contrarian perspective is whether a stock has more upside potential. That is, it is crucial to determine if there is remaining investor interest available on the sidelines that has not yet seeped into the stock. A study of various sentiment indicators is a good way to determine if an equity has continued upside potential. First, option activity is not overwhelming toward AGY, but what speculative action has transpired is decidedly optimistic. Among the front three-months' options series, there are about 5,000 open calls positions compared to under 150 open put positions for a Schaeffer's put/call open interest ratio (SOIR) of 0.03, which ranks in the bottom one-quarter of the past year's worth of SOIR readings for AGY. Although AGY isn't a favorite among the options crowd, it has elicited quite a bit of optimism from the speculative players who have chosen to bet one way or the other.

Optimism (or at least, declining pessimism) is also epitomized by a sharp decline in the amount of shorted AGY shares. Since short selling is a device of bearish investors, a decline in the number of shorts suggests that investors are becoming more complacent toward the shares. There are currently just 766,000 AGY shares sold short, amounting to a fairly trivial short-interest ratio of 2.6 times the equity's average daily volume.

Click the following link to see the Shorted Shares Chart for AGY Since October 2002: http://www.schaeffersresearch.com/wire?ID=9990

One area of growth potential lies among Wall Street professionals. Of 15 analysts following the shares, only 27 percent have listed AGY as a "buy." The proverbial tide may be turning, however, as "buy" ratings have been on the rise since the beginning of the year, while the number of "hold" ratings has been declining. This trend bodes well for the stock, as further upgrades could infuse short-term strength into the shares.

Click the following link to see the Analyst Ratings Chart for AGY Since April 2003: http://www.schaeffersresearch.com/wire?ID=9990

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