There is only one state in the country that has yet to finalize its annual budget. The political situation in Pennsylvania is getting desperate. Without a spending plan in place, dozens of organizations are not getting the funding they need to survive. Across the state, angry citizens are sharpening their proverbial pitchforks.

While the desperation in Harrisburg will slow the state’s economy, the fiasco is creating a profit opportunity for a handful of companies, most notably natural gas drillers and gambling operators.

The power of a strong lobby

Buried beneath Pennsylvania’s rolling hills and ancient mountains is a massive stockpile of hard-to-reach natural gas. The Marcellus Shale formation has been a focus of the nation’s gas industry for the last decade.

Pennsylvania’s budget woes are a boon for drillers as revenue-desperate legislators lease even more of the state’s forests in an attempt to drive closed a billion-dollar shortfall. With natural gas prices near multi-year lows, the companies signing those leases are likely getting a large bargain.

Companies like Atlas Energy Resources (NYSE:ATN), Rex Energy (NASDAQ:REXX) and Anadarko (NYSE:APC) should be near the top of your watch list.

Another company worth watching, especially after this morning’s news, is Penn National Gaming (NYSE:PENN). While the company has nothing to do with pulling natural gas out of the ground, Pennsylvania’s budget desperation is going to add to the company’s top line.

When up against the wall, politicians will do just about anything to get themselves out of a nasty situation. Pennsylvania’s lawmakers allowed slot machines into the state just a few years ago in an effort to reduce property taxes.

Even though the program was a verifiable bust, the latest budget proposal expands gambling even further. Now the state will be open to various table games.

Move over Sin City

That is great news for Penn National, one of the state’s largest gaming operators. High-margin games of poker are never bad for profits – at least if you are the house.

Penn National is in the news today as word spreads of its desire to purchase Las Vegas’ Fontainebleu resort and casino. The $3 billion facility is only 70% complete as work was halted last spring after funding was eliminated.

Negotiations are still in progress, but there is a chance Penn National could get itself a bargain with the deal. If it happens, shareholders could get a double-whammy of new, high-margin revenue streams.

Put this one at the top of your watch list and watch the action closely.

No matter what happens with Pennsylvania’s budget, somebody is about to profit. Isn’t that how the government works?

Source: Put These Four Stocks on Your Watch List

The problem, of course, is that if manufacturers can’t borrow to buy from suppliers, and wholesalers can’t borrow to buy from manufacturers, and retailers can’t borrow to buy from wholesalers, then consumers can’t get auto loans, credit cards, and mortgages.

The economy faces a serious headwind.

The companies in the toughest position, however, are those that are highly leveraged. Even though interest rates have fallen substantially, they aren’t able to access the credit markets (at reasonable rates) or increase their bank lines to get the liquidity they need.

And therein lies an enormous opportunity for investors like you and me – profiting from corporate takeovers.

Corporate Takeovers – Solid Companies vs. Weak Competition

Companies that have solid balance sheets and high levels of cash are now in a position to scoop up their weakened competitors through corporate takeovers. That allows them to purchase assets on the cheap and potentially increase their profit margins – by eliminating the competition – at the same time.

Let me give you a few examples.

• In the U.S. recently, drug giants Merck (NYSE:MRK) and Pfizer (NYSE:PFE) have unveiled deals to buy Wyeth (NYSE:WYE) and Shcering-Plough (NYSE:SGP), respectively.
• Chinese companies, backed by the dollar-flush Chinese government, have been on a shopping spree lately. Already this year, Chinese firms have announced more than 300 takeovers totaling nearly $68 billion.
• In the pharmaceutical industry, there is plenty of fair game. Many small biotechs, for example, are running out of capital. This dovetails nicely with Big Pharma’s shrinking drug pipelines.
• The gaming industry, too, is hurting bad. For instance, credit downgrades and potential bankruptcy hang over companies like MGM Mirage (NYSE:MGM) and Harrah’s. But Penn National (NASDAQ:PENN) is in a fine position to buy them or other weakened competitors.
• Look at the oil equipment leasing industry. Nabor Industries (NYSE:NBR) carries $4 billion in debt. (Earlier this year it had to pay 9.25% to raise $1.1 billion.)
• But Patterson UTI Energy (NASDAQ:PTEN) is laughing all the way to the bank. Its sound financial condition – and zero debt – are allowing it to invest millions in new equipment.

When the price of oil rebounds who will be in the best position to prosper? Clearly, it’s Patterson. That forces Nabor to at least consider the idea of putting itself up for sale.

This same corporate takeover scenario is playing out in multiple industries in markets all over the world.

How Many Potential Corporate Takeover Candidates Are In Your Portfolio?

Yet when I ask investors how many potential corporate takeover candidates they have in their portfolio, more often than not they simply shrug their shoulders and say “none.”

That’s unfortunate. Investor’s Business Daily recently reported a survey of institutional investors conducted by Boston Consulting. Over 80% of them agree that the current market represents a “once in a lifetime” opportunity for corporate takeovers.

My advice? Don’t rest on your laurels. Buy a handful of potential corporate takeover targets now – before all the new deals starting popping.

Good investing,

Alexander Green

Source: Corporate Takeovers: ‘Once in a Lifetime’ Investment Opportunities

This from Today’s Financial News:

Revenue for Penn National Gaming Inc. (NASDAQ:PENN) in Q3 slowed, as it did at most casino operations. But due to the termination of an attempted acquisition deal, the company received a settlement of a cool $225 million. In addition, the (intended) acquisition group purchased 12,500 shares of Series B Redeemable Preferred Stock due 2015 for $1.25 billion.

As a result, Penn reported a net income of $147.5 million. That’s $100.9 million more than the same quarter last year!

Currently, Penn operates 19 facilities in 15 jurisdictions. With this influx of cash, the company has declared itself ready to expand.

Waiting for November 4

Thanks to huge budget deficits, the State of Maryland is reconsidering its former stance on slot machines. This election day, my fellow Marylanders are likely to approve a referendum that would open the state for slots.

Penn has indicated interest in contracts to run slots facilities in Maryland. If the referendum to permit the five proposed sites is passed, the company will be ready to move on the bidding process.

Priced around $20, Penn had seen a 52-week high of $62.25. And with a P/E of 6.5, this company holds promise.

I recommend you buys shares of Penn National Gaming Inc. (NASDAQ:PENN) today [Friday] at or under $21. Depending on the outcome of the referendum, you could see short-term gains of 20% within the first weeks of November.

Source: Profit referendum: How this election day could boost Penn National (PENN)