Boys will be boys.

 

Despite being the party of family values, the Republican National Committee spent $2,000 at a West Hollywood adult entertainment club featuring near-naked women and simulated bondage activities.

 

Let’s face it: There is a large market for adult entertainment and even some of those supposedly against such vices partake in their availability.

 

• The secret to never losing money

 

Clearly, there’s money to be made in the category.

 

Two thousand dollars at one club is a lot to spend. Imagine the dollars flowing through these clubs? It’s a high-dollar activity that attracts customers despite the recent recession.

 

Interestingly, the West Hollywood club, Voyeur, is not really a strip club. The entertainers there are scantily clad.

 

If this much money goes to scantily clad clubs, how much money is being spent at true strip clubs where the entertainer entirely disrobes? I suspect much more.

 

Investors can make money in this category with any number of adult entertainment stocks, including Playboy (PLA) and Rick's Cabaret (RICK).

 

I made Rick’s one of my Top Stocks to Buy in 2010 at the start of the year. Shares are down today, but are still up 40% since the beginning of the year.

 

At $12 per share, Rick’s trades for 13 times 2010 earnings estimates of 93 cents per share. Reflecting the expected growth in spending at adult-entertainment clubs, analysts expect Rick’s to make $1.39 per share in 2011.

 

Any time you can buy almost 50% earnings growth at a forward price of 13 times, you are getting a bargain. Yes, Rick’s has already moved up 40% this year, but the valuations and earnings estimate metrics suggest there are more gains to be had.

 

As for Playboy, the pioneer in adult entertainment has missed the boat on the evolution of the industry. The company remains heavily influenced by its founder, Hugh Hefner, and with all due respect, Hef is a bit past his prime.

 

As a result of corporate missteps, Playboy plods along with a de minimis valuation. The company’s brand and assets are worth significantly more than the current stock price of $3.65.

 

Perhaps they should take a cue from Voyeur and open a refreshed Playboy brand line of clubs in the same vein. They would at least have the Republican Party as potential customers.

 

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