While watching the news one night last week, I could not help but chuckle when I saw a group of people from a nursing home playing a bowling game on the Nintendo Wii. They were all wearing custom bowling shirts, and there was an audience who clapped each time the bowlers swung their Wii controllers in the air. These are good times for video game companies. Gamers are no longer just young men and children. 25% of gamers are age 50 or older, and 38% of all gamers are women. Sales of video games have almost tripled in the last 10 years with $7.4 billion worth sold last year.

With three brand new consoles on the market, video game related stocks have shown big returns to begin 2007. There is still room for investors to make money on these stocks before the current video game cycle ends. Here are some possible stocks to buy to take advantage of the video game boom:

Electronic Arts (ERTS) produced the top selling video game of 2006, Madden NFL. The company is sitting on $2.65 billion in cash and has zero debt. EA has been diversifying its income lately by creating a full-service music label called The Artwerk. One negative point on EA is that its P/E, Price/Sales, and Price/Book are higher than the other video game stocks, which could mean there is not much value in the current stock price.

Activision (ATVI) will soon be releasing games linked to three of the biggest movies of the year: Spiderman 3, Shrek 3, and Transformers. Its stock price has jumped more than 75% since last July.

THQ Inc. (THQI) has publishing agreements to produce games with DisneyPixar, Nickelodeon, and World Wrestling Entertainment. It has acquired Paradigm Entertainment and Mass Media, Inc. since last July.

Take-Two Interactive Software (TTWO) produces Grand Theft Auto, one of the most popular video games, but this has been its only success. Take-Two's share price has been struggling lately compared to all other video game stocks. Shareholders replaced its CEO and entire board of directors at the end of March, which could be a good thing if the new management can turn things around.

Nintendo (NTDOY.PK) has the most popular console going right now with the Wii. Its stock price has more than doubled in the past six months. Gamestop (GME) looks to have the most value of all the video game stocks because of its high return on equity and low P/E, Price/Sales, and Price/Book. It now has 4,778 retail stores and is the largest reseller of used video games. Unlike the previously mentioned software companies, Gamestop has the luxury of selling the most popular console and games, no
matter which ones come out on top.

Other video game related stocks to watch are Microsoft (MSFT), Sony (SNE), Majesco (COOL), Atari (ATAR), and Webzen (WZEN).

Check out Jim Cramer's thoughts on some of these stocks in this video interview.

By Project Stocks