This is a risk, and one we cannot just blindly endorse without at least some caveats.  Our video game pick for 2011 is Electronic Arts Inc. (NASDAQ: ERTS).  The former leader of the video game publishing world has failed to live up to expectations for longer than we care to consider. It has the sports franchises and we have all but dismissed ‘The Sims’ in the new world of video games (fair, or not…).  EA has been trying to capture more and more of the “Apps” game revenues and at least the cost is lower for development.  It also has many steady performing games in its library.

EA has laid off workers and underperformed for so long that we are calling it the next video game turnaround story for video game investors.  Even if it fails to turn around, the good news is that the sentiment is negative enough that it could be largely priced in.  With shares around $16.40, the consensus analyst target is $19.83 and its 52-week range is $14.06 to $20.24.

EA has a market cap of $5.4 billion.  That $16.40 could be much higher if the company can come close to delivering a new hit in the next 12 to 18 months.  Any hint of good news would likely propel the shares higher in 2011.  It is not exactly cheap with estimates at $0.64 EPS and $3.8 billion in revenues for FY March-2011 and $0.84 EPS and $4.01 billion in revenues for March-2012.  What helps offer support is close to $1.65 billion in cash and short-term investments with no major long-term debt.

We are taking a risk by not chasing the popular gravy trains or by sticking with a winner we have already picked, but sometimes that is the best call.

JON C. OGG