POKER is hot and famous players such as Brad Pitt, Ben Affleck and Nigella Lawson are raising its profile further. With star-studded, big-money poker tournaments screened on television and the internet, the game is garnering increased audiences.

Seven-card stud, Texas hold ’em and five-card draw are fast becoming part of the vocabulary of players and investors alike.

Everyone wants a piece of the action and online gambling companies and traditional bookmakers alike are fighting it out for the attention of players and investors.

Fittingly, the stakes are high. British players bet £19m (€28m) a day online last year and that figure has doubled this year, according to industry estimates. The number of online British-based players may be as high as 150,000. There are no Irish figures available at present.

Investors have also placed big bets on the online poker bonanza, but dramatic developments in several London- listed gaming companies this month have highlighted the risks involved.

Last week, it was revealed that Sportingbet, a British online gaming firm, had failed to inform shareholders of an American lawsuit that may cost it millions. Under listing authority rules, companies must tell the market if a lawsuit may be price-sensitive. The share price fell almost 7% in one day following the news.

The firm then pulled out of bid talks with Empire Online, sending that firm’s shares tumbling by 20%.

In mid-September, shares in Partygaming, which owns Party Poker, the industry’s biggest player, fell 33%. The firm, which went public over the summer and has 50% of the online poker market, said industry growth forecasts were too optimistic.

The market had grown by only 4% in the third quarter, compared with 26% in the same period the previous year, it said.

Around the flotation, many market watchers had warned that the poker boom had all the hallmarks of another dotcom bubble. Now, with all this bad news in the sector, should investors hold or fold?

Jonathan Compton, an analyst with the British-based Bedlam Asset Management, is not impressed with the sector, as he believes the risks are too significant.

“Most online gaming is illegal in the United States, where most of its players are based,” he said. The US Department of Justice is considering prosecuting some of the online companies.

Shrinking margins are another cause for concern as more firms enter the market, he says. “Any geek with a computer could set up one of these companies,” said Compton.

Innovative technology means there are more ways to gamble than ever before. Mobile phones and interactive television, which allow people to bet remotely, are overtaking internet betting.

The spend on marketing is increasing too, as firms such as Pokershare, 888.com, 32Red, and PokerStars.com try to increase brand awareness.

The message from professional investment managers is: tread with caution or try another play on the gambling boom.

More conservative investors might think about buying shares in established firms such as Paddy Power, William Hill, Ladbroke’s or Coral.

David Jennings, a gambling analyst with Davy, is uncomfortable with online gaming companies. “There are so many question marks over online operators,” he said. “So if you can invest instead in a company with online and traditional channels, then you are giving yourself the best shot.”

His top pick is William Hill, the British turf accountant. “It has not been fashionable to look at bookmakers, but there is more value here with far less downside risk,” he said.

William Hill is trading at 13 times earnings and looks like a low-risk play in the sector.

Pramit Ghose, the head of investment strategy at Bloxham Stockbrokers, agrees. “William Hill and Hilton have done well over recent weeks and are still good value,” he said.

Eugene Kiernan, the head of asset allocation at Irish Life Investment Managers, takes a value-based approach. He says he likes the Irish bookmaker Paddy Power’s steady track record on earnings and profits. “It is different from other gaming stocks because it is spread over retail, phone and internet,” he added.

Paddy Power’s strong management team is rolling out the Irish business model in Britain. In the long term the odds should favour investors in this stock, Kiernan says.

Those willing to speculate and take a slightly different approach may be interested in Cyberview Technology, which recently floated in London. The £100m (€147m) firm supplies online gambling machines for casinos and pubs.

“Cyberview Technology is a speculative (play),” said Ghose, “but in our view has much upside over the next 12 months.”

Either way, there are no certainties to investing and online poker is no exception.