Gaming stocks generally slid to a soft close in October compared with the solid performance seen in the overall market.

Casino stocks as a group underperformed the Dow Jones industrial average by 15 percentage points in October after outperforming the market by 35 points since September 2001.

"Definitely, there was profit-taking given the success gaming stocks have had year to date and over the last 18 months," Deutsche Banc Securities analyst Marc Falcone said.

Friday saw a slight reversal of fortunes with the Dow up 1.5 percent to close at 8,517.64, while the Dow Jones Casinos Index was up 1.5 percent to 240.5.

In October, the casino index fell 4 percent compared with an increase of 11 percent in the overall Dow. In the past year, however, the casino index has been up 40 percent despite the Dow slipping 7 percent.

"Second, in October there were investor concerns about the sustainability of growth over 2003," he said.

At Goldman Sachs, analyst Steve Kent said that with the reports of third-quarter earnings investors became concerned about 2003 and the possibility that earnings will slow.

"The past couple of weeks have brought the concerns to the forefront of investors' minds," Kent said. "There have been questions about the fourth quarter and 2003, and the outlook was not as powerful as required to sustain increases in stock prices."

Also, in addition to profit-taking after "a terrific run" for the gaming stock group, there is some perception the stock market is bouncing off a bottom, so investors want to take advantage of depressed stock prices, Kent said.

"Fundamentally, investors are looking at '03 to see if there will be top-line revenue growth. That's what will keep the group going," if anything does, he said.

Bear, Stearns & Co. analyst Jason Ader said gaming stocks performed when investors were maintaining defensive portfolios.

"(Now) investors are looking for other areas because of expectations with the market up in October," he said. "They see the market near bottom and (a coming) economic recovery. So money is moving from defensive groups to growth groups, and gaming stocks don't correlate with the economy."

The overall market is in sector rotation out of defensive industries into industries that haven't performed that well, such as airlines and tech stocks, he said.

Among stocks in Nevada-based gaming companies, the Applied Analysis Gaming Index, a monthly weighted average developed by a Las Vegas-based financial consulting firm for tracking eight industry stocks, showed gaming stocks up 4.7 percent.

"There were specific return situations for some companies that are leading them to outperform the market," Falcone said.

Although most of the gaming operators included in the Applied Analysis index had stock prices fall, International Game Technology performed strongly enough to pull the average upward.

IGT shares were up an average of 7 percent in October compared with September. They were outperformed only by Station Casinos, whose average share price increased 15 percent compared with the previous month.

"Station Casinos stock was up 60 percent since August. There are still a lot of catalysts for them in the Las Vegas market plus their progress with the ($100 million United Auburn Indian) project in Sacramento," he said.

Also at Deutsche Banc, analyst Eric Hausler said Sacramento "is a tremendously large gaming market and very underpenetrated."

IGT also is bucking the trend with gaming stocks because investors are betting there will be an expansion of gambling across the country after the election, he said.

Gambling initiatives are on the ballot in 11 states and expansion of gambling has been a major campaign issue in at least 23 states.

A third reason gaming stocks performed poorly in October involved the management of mutual funds, some of which have fiscal years that end in October, Hausler said.

"If you're looking at closing out your fiscal year, you'll sell stocks that are up big for the year so you see some rotation of capital into sectors whose stocks have been beaten down such as telecommunications and tech stocks," Hausler said. "So gaming is feeling the effect of that."

Among weaker stocks, "MGM Mirage has come way off its recent highs because of concerns about the softer pricing environment in Las Vegas, although the outlook for the company looks solid and its shares remain good values for investors," Hausler said.

Ader said MGM's quarterly report dampened market receptivity.

"(Their) earnings were relatively low quality," he said. "They used accounting gimmicks to make their numbers."

Added Hausler: "Park Place will tread water for a while. Management has a good plan, but it will be a few quarters for investors to see it.

"Harrah's is another name under a lot of pressure, but the company has a good portfolio overall and is solid. Still, going into the fourth quarter may prove choppy," he said.

Outside the Nevada-based companies, he said, several regional operators are way off market highs.

"Isle of Capri, for example, has seen a 40 percent drop in stock prices. Again, that is partially the result of the rotation of capital," he said.

Ader also said several gaming companies are experiencing earnings shortfalls, particularly Argosy and Ameristar in addition to Park Place.

"It was not a great month for gaming stocks," he said.