Buy Midway Games

First let me say that Nike and its stock charmers decided to break resistance at $100. I’m not afraid to take a loss when prudent, so let’s all cover our NKE shorts. If you shorted Nike when I suggested at 97.70 you would have a 2.5% loss.

Back on topic, I found a game developer who had been kicked in the head by Wall Street. Since December ‘05 the stock of Midway Games (MWY) has gone from $23 to $6. And yes, with a negative income and EPS, it’s a no brainier. Yesterday the stock closed at $6.90 and I’m buying shares for my personal portfolio. Here’s why:

As you know from my previous article on the Wii, I know what teens and young adults are likely to buy. This is my sort of specialty when it comes to investing. I know better than analyst XYZ what's going to be a hit and what's not. Lets take a look at Midway’s upcoming games.

Unreal Tournament 3 – This first person shooter is well known among gamers, right beside Halo and Counter Strike. This is the type of game that kids buy out of loyalty, even when an illegal version can be downloaded.

Strangle Hold – Not a blockbuster, but the type that will always be rented out because of its action.

Hot Brain: Fire Up Your Mind – This will be called PSP’s answer to the Nintendo DS handheld’s Brain Age (the highest selling game on DS). Smart idea, Midway.

Lord of the Rings Online – A new MMORPG with amazing graphics. Find me a series with a bigger fan base and I will call you a liar (minus Star Wars, which is overplayed in the gaming world).

Finally, I have to mention that Midway owns the licensing to Mortal Kombat… nuff said.

So what if Midway has some great games coming out?
We have three catalysts that I believe will make big money for Midway and us.

1. New consoles – We just got a fresh batch of new game systems, effectively ending the lag for game publishers of outdated PS2s, Gamecubes, etc.

2. MMORPGs – Midway did their homework on the PC market by getting into the online world. MMORPGs, or Massive Multiplayer Online Role Playing Games, are not a one time purchase for gamers; instead monthly subscriptions allow gamers to stay playing in the online world. This kind of income is new for Midway, and has been a Godsend for companies like Blizzard Entertainment (creators of World of Warcraft). These games capture a loyal fan-base and make a killing (when done right).

3. Great set up in charts - The stock is below the 50DMA which could cause some turbulence, but its MACD is about to cross zero, it has support right below it around 6.55, and recent positive earning from other game developers like ERTS could prove to be an added boost, getting derivative players to add positions.

Midway is adapting quickly to a smarter way of making money in the developer business. I have a lot of confidence in the company. Needless to say, buy MWY on Monday.
-Chris