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As corporate raider Carl Icahn fights to wrestle control of filmmaker Lions Gate Entertainment, it's easy to overlook his other big bet — on the betting business.

The billionaire investor has taken control of 10 casino properties in the past three months and is currently vying for three more. He grabbed control of nine Tropicana Entertainment casinos, including the Tropicana in Atlantic City, acquired the partly built Fontainebleau megacasino in Las Vegas and is currently in a contentious bidding war with Donald Trump for control of three Trump-branded casinos in Atlantic City.

It all comes down to price, valuation and long-term potential returns, says Icahn. But he quickly emphasizes that he isn't expecting a speedy bounce back in the battered sector.

"I like to wait and buy things when nobody wants them — that's when you get the best values," says Icahn, who made his investments through bankruptcy-court proceedings. But he cautions that the sector still holds considerable risk and that a rebound could be many months or even years away. "Only a fool will tell you they can pick the bottom," he says.

So how far off is the bottom? "There's certainly going to be rough sledding ahead in the casino industry — Vegas is overbuilt and Atlantic City has its problems with a lot of [regional] competition. That's precisely why they're selling at the values they're selling at," says Icahn.

Still, many investors and analysts are eyeing Icahn's move closely. Some wonder if his move into the sector is a sign to start putting investment chips back on the table and roll the dice on companies with big exposure to the U.S. gaming market. "[Carl Icahn] has always been a very astute investor," concurs Clyde Barrow, a casino expert and professor at the University of Massachusetts at Dartmouth. "There's a lot of upside potential, and if you're investing for the long term, now is the time to buy."

"It definitely could be a sign that valuations are at or near record low levels," says Janet Brashear, a senior analyst at Sanford C. Bernstein & Co. However, she cautions it will likely be 2011 before the market stabilizes and 2012 before it rebounds.

Icahn has earned accolades on Wall Street for his savvy stock-picking choices, knack for launching feisty board battles at poorly performing companies and, most importantly, his ability to snap up unwanted, undervalued or mismanaged companies at bargain-basement prices and turn them around for big profits.

As an example, one of Icahn's biggest windfalls came from an investment in cancer-drug maker ImClone Systems. The corporate raider jumped into the stock in 2006, launched a nasty proxy fight, strong-armed the board into rejecting a $36-a-share takeover offer and assumed the post of chairman. Two years later, the company accepted a $70-a-share bid from Eli Lilly & Co. "I felt vindicated," boasted Icahn at the time. Then there was National Energy Group, where he turned a $300 million investment in the company in 2003 into a $1.5 billion payoff when it was sold in 2006, according to Icahn.

But not every investment has been a home run. Icahn jumped into video-rental company Blockbuster in 2005 when its shares were trading at between $9 and $10 apiece. They recently changed hands at 30 cents a share — Icahn remains a major stockholder — and the company indicated in a recent filing it will likely file for bankruptcy protection.

Still, Icahn's recent foray into the gaming sector is grabbing investors' attention.

The sector has taken a huge hit over the past two years, as the crippling recession, the pullback in business travel, frozen credit markets, the decline in consumer spending and even President Obama's "anti-Las Vegas" comments took a hefty toll on casino companies. Gaming revenue plummeted and a flurry of companies, such as Herbst Gaming, Trump Entertainment and Station Casinos, filed for Chapter 11 bankruptcy protection. Stocks nose-dived, with major names losing more than 85% of their value from their October 2007 peak.

Although many names have rallied from their trough in March 2009, they're still far short of their highs. Las Vegas Sands (LVS) was trading at more than $138 a share in October 2007 and plunged to under $2 a share in March 2009. Although it has since risen 10-fold to $20 a share, it's still far below its peak. Wynn Resorts (WYNN) and Las Vegas Sands have seen the biggest gains, with their stocks rising 296% and 842% respectively in the past 52 weeks. But their gains were driven largely by their exposure to the lucrative Macau market, where gaming has been on fire. Indeed, gaming revenue totaled $15 billion in Macau in 2009, which is three times Las Vegas' $5 billion, according to Brashear, and both Wynn and LVS relied on Macau for more than 60% of their earnings in 2009. "The expansion in Asia has been unbelievable," says Brashear. "There's 2.5 billion people within a five-hour flight of Macau, and that's nearly 40% of the world's population."

But U.S. gaming stocks don't reflect any recovery in the U.S. market — at least not yet. This means stocks with big exposure to the U.S. gaming market could be poised to rally. How much and how fast this happens will depend on the speed and scope of the economic rebound.

Companies with big holdings in Sin City will likely see an earlier and faster rally than those that focus on regional markets, analysts say. There have already been signs of improvement in Las Vegas, where traffic has increased in the past four months, although gaming revenue remains flat, says Bill Lerner, chief executive of research group Union Gaming Group. Also, some companies like MGM Mirage (MGM) who were buried under a mountain of debt and teetering on bankruptcy a year ago have managed to restructure their debt issues and are no longer on analysts' bankruptcy watch lists.

"If you look out two or three years with the expectation that the industry will return to its historic growth pattern, the upside [potential] is enormous," says Barrow.

But experts are more bearish on Atlantic City and other regional markets. Atlantic City is facing stiff competition from a flurry of neighboring states, such as Pennsylvania, Delaware, West Virginia and Maryland, that have been expanding their gaming operations beyond slot machines to include table games. At the same time, other states, such as Massachusetts and Rhode Island, are expected to legalize gambling to fill budget shortfalls.

Also, the average age of Atlantic City's casinos is 26 years, making it difficult for the outdated gambling houses to compete with newly built ones in nearby states, says Chris Snow, a CFA and senior analyst at CreditSights, an independent credit-research firm.

Las Vegas won't be affected by the regional casinos, as much of Sin City's traffic comes from conventions and vacation goers and its properties are state-of-the-art megaprojects of a sort that can't be found in other parts of the country, says Snow.

Brashear believes MGM would see the biggest rally from a Las Vegas recovery, with Wynn and Las Vegas Sands also reaping benefits.

As for Icahn, this isn't his first foray into the casino sector. Between 2000 and 2006, he purchased four casinos — the Stratosphere, Arizona's Charlie's Boulder, Arizona Charlie's Decatur and Aquarius Casinos — for $300 million, and sold them for $1.2 billion in 2008 before the recession unleashed the worst of its fury. (The original price was $1.3 billion, but was adjusted down slightly at closing time.) "That's a pretty good reward for waiting, right?" says Icahn. "Hopefully history will repeat itself."

• Janet Morrissey
• Carl Icahn is snapping up casinos in both Las Vegas and Atlantic City as he bets heavily for the second time on a major rebound in gaming. Is this a sign that the casino business has finally bottomed?