Best Wager: the Track : Hollywood Park’s Stock Quadruples in Price

Some people say the surest thing at Hollywood Park doesn’t eat oats.

Stock in Hollywood Park, Inc., the company that owns the Inglewood race track and its 325 acres of real estate, has quadrupled in price from $7.50 a share last Thanksgiving to $30 now.

It’s a steep price for a company that has only 25 cents a share in earnings for the first nine months of this year.

But investors are confident.

“You don’t own Hollywood Park for 1993 earnings,” said Tom Ryan, senior gaming analyst at Ladenburg Thalmann & Co. in New York.

According to Ryan, there are basically four things to like about Hollywood Park: Real estate, horse racing, other forms of gambling and the potential for what he calls “upside surprises,” which might include new acquisitions.

Inglewood voters a year ago gave Hollywood Park permission to open a new card casino in the former Cary Grant Pavilion at trackside. Analysts think that if the club opens early next year with at least 100 tables working, the company’s revenues and earnings should soar.

Profits of $1 a share would be a conservative estimate for next year, Ryan said.

Of course, that’s like saying the stock is now trading at 30 times next year’s hoped-for earnings. That makes Hollywood Park one of the priciest gambling stocks around.

But what some investors are pulling for is a gambling home run. They look for California to legalize electronic games, such as video poker, and eventually the full range of casino-style games. If that happens, the thinking goes, Hollywood Park--with lots of open space located in a receptive community close to the airport and the new Century Freeway--is positioned to become the most lucrative gaming center this side of Las Vegas.

Gambling stocks, which can fluctuate wildly, are not always a good pick for the security-minded. But Hollywood Park’s real estate provides a measure of protection against unwelcome changes in the gambling climate.

Harry Ornest, a Beverly Hills investor and sportsman who has long been one of the largest individual owners of Hollywood Park stock, put it this way: “It is the most valuable, substantially undeveloped piece of urban property in the western United States.”

R.D. Hubbard, Hollywood Park’s chairman and largest individual stockholder with more than 2 million shares, is seen as another key to the company’s success. Hubbard has refurbished the race track, introduced satellite betting and has used stock offerings to completely wipe out the company’s long-term debt and clear the decks for possible acquisitions.

One potential acquisition has raised eyebrows. A committee of Hollywood Park directors, aided by the investment banking firm of Oppenheimer & Co., is studying whether to purchase the Woodlands Race Track in Kansas City, Kan., which is 60% owned by Hubbard.

Kansas might give the Woodlands the authority to operate casino-style gambling, which would face competition from riverboat operators across the Missouri in Kansas City, Mo. Hubbard believes land-based gambling will do better.

If it’s a great opportunity and Hubbard owns 60%, why sell out to Hollywood Park, of which he owns only 14%? Hubbard said he wants to focus on Hollywood Park and will make money either way.

Whereas Hubbard wants to accumulate more Hollywood Park stock, some other insiders tore up their win tickets before the stock surged last summer.

Bruce McNall, owner of ancient coins, fast horses and the Kings, sold his 90,000-share Hollywood Park stake last winter for slightly less than $1 million. Had he stayed with it through the summer, McNall would have cleared another $2 million.

Jeremy M. Jacobs, chairman of the Delaware North Corp. and owner of the Boston Bruins, sold his nearly 700,000 shares last February for about $13 a share, missing a $10-million-plus profit.