For nearly a decade, I have gone to Las Vegas to meet up with a group of friends who share my interest in poker. Every year, we have our picture taken at Binion’s Horseshoe Casino, the birthplace of the World Series of Poker.

Looking back over past pictures, I can see how much my friends and I have changed. (By the way, we aren’t old, we’re “seasoned.”) But if we have changed over the years, so has Las Vegas.

Las Vegas transformed itself from a cheap gambling destination to a celebrity hangout. In the mid-2000s, casinos tried to outdo each other for the title of most luxurious. Rooms on the Strip were hard to find less than $200 a night — and $10,000-a-night suites were there for the asking.

To some extent, the economic downturn has Las Vegas returning to its roots. Bargain shoppers are finding plenty of rooms in luxury hotels for less than $40 a night. And casinos are bending over backward to cater to their new price-sensitive clientele.

During my last visit, I saw off-peak breakfast specials for $1.99. Happy hours and “ladies drink free” nights were hosted by almost every casino nightclub and bar. But what I saw on the casino floor got me thinking about investing… “penny” casino video games were packed with bargain gamblers.

These gaming devices aren’t your old one-armed-bandit slot machines. They offer players a sophisticated audio and video experience, many with themes based on popular TV shows and movies. “I Dream of Jeannie,” “Happy Days,” “Jaws” and “The Wizard of Oz” were popular themes. There were a number of original content games that were also favorites.

I usually like to try things before I invest in them. I’ve personally checked out the hair care products and customer experience at Sally Beauty Holdings (NYSE: SBH) stores. I also sampled the wares of my former portfolio holding Diageo (NYSE: DEO) — an alcohol and beer distributor (both delivered nice gains, by the way). So while I hate to play when the house has the advantage, I tested out a number of the latest casino video games.

At first, my traveling companions made fun of my low stakes, non-poker dalliance. But before long, they had each enjoyed the experience. Of course, they gravitated toward games more favored by their gender. Star Trek, a fishing-based game called Reel ’em In, and a number of battle-themed games seemed to attract my male counterparts. In fact, looking around the casino floor, I saw more men playing machine-based games than I had in years of visiting Vegas.

That’s a pretty nice trend for the companies making slot machines. And then I started doing a bit of research…

No doubt casino budgets are still tight, but that hasn’t affected their ability to sell new machines at higher price-points. This has been achieved through increased sales of premium-priced Wide-Area Progressive (WAP) and networked systems. WAPs allow a casino company to link progressive jackpots across multiple locations. Networked systems allow a casino company to change or update key features of a game at the server level, as opposed to making changes to each individual machine.

More interesting? Replacement of older machines on the casino floor has been slow during the past two years. But conditions for casino companies have stabilized — and in many cases improved — and I’m expecting casino budgets to be healthier in 2011.

Action to Take–>There are certainly no guarantees, but I think the machine replacement rate could soar from what the industry is executing now, and that means shares of slot machine-makers would likely follow.

There are basically three big players in the slot machine market. I picked the current market leader — a company I’ve been following for years — for inclusion in my $100,000 real-money Stock of the Month portfolio a few months ago. So far, it’s showing a nice double-digit gain, but nowhere near what I expect if the replacement cycle really heats up.

P.S. — My entire strategy behind Stock of the Month? Keep things simple. It’s why I only have one portfolio of my top dozen picks… and only cover my one best idea each month. To see the returns I’ve generated, I invite you to read this memo (my performance is listed about halfway down the page).