• At the end of September, there were 10,250 VGT’s up and running, up 9% (833 units) MoM
    • Since the market opened last September, average monthly installations have trended at 849 units
  • Using an average of the machines outstanding at the end of August and September, average daily win per device was $100/day in the month of September, in-line with the average for the last 3 months.  As the chart below shows, despite recent added supply, daily win day has remained steady around the $100 level.
  • As of October 24, there were still 1,554 establishments pending approval.  If approved, these establishments can add a maximum of an additional ~7,770 machines.  This implies a market size of roughly 18-20,000 VLTs, unless Chicago opts in.  At the current pace of installations, we expect shipments to IL to taper off materially by the summer of 2014.
  • Supplier impact:              
    • IGT has been shipping about 1,000/ Q to IL which translate to about 5 cents a year of EPS impact
    • During the last 2 quarters, BYI’s shipped 1,369 to IL and 1,943 units over the last twelve months.  An additional 2,000 VGT unit shipment to IL should translate to about $0.25 cents in earnings for BYI.


[video] Keith's Macro Notebook 10/28: VIX, GOLD, UST 10YR


In preparation for NCLH's F3Q 2013 earnings release tomorrow, we’ve put together the recent pertinent forward looking company commentary.






  • Norwegian Getaway, is getting ready for her debut in Miami early next year.


  • Looking at deployment for the third quarter, our capacity in each itinerary is as follows. Our Europe program has 28% in the Mediterranean and 8% in the Baltic. We have approximately 20% each in Alaska and Bermuda, 13% in the Caribbean, 7% in Hawaii, and the balance made up of other itinerary.


  • I would say that we've had some promotional activities going on following that. And when I look at it right now, I would say that things in the last few weeks seem to have been a little bit better. And I think some of the noise as well is – some of the players may be doing a little bit more from a promotional standpoint to fill up their ships.  Having said that, what I'm seeing now is that will play out over the remainder of this year.


  • Onboard, we have a great quarter – some of it is Breakaway, some of it is just the continuing efforts we have. I would tell you that the remainder of the year is built into our forecasted guidance and yields...But it is a little lumpy.


  • We've been able to bottom out in Europe market with yields and we're starting to see the ticket yields improving. But there are a few more Europeans on the ships than what has been the trend.
  • On the margin, we're seeing a bit more of the Americans, but we're also seeing quite a few – and you look at the European economic situation, you're getting a little bit of a later booking from some of these countries. And we're all fighting for the same number of consumers. So in some cases, you're getting people that are spending a little bit less from the European side.


  • We're feeling pretty decent about what's going on for next year, although it's early. We're feeling pretty good about the booking patterns for 2014. First quarter, we're feeling very good about both on the load and the price.


  • My preference would probably be given where we are, it would probably to be in the stock repurchase program.


Daily Trading Ranges

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Takeaway: The world’s largest tech company is set to report earnings today. Here are Hedgeye CEO Keith McCullough's trading levels in advance.



Trade :: Trend :: Tail Process - These are three durations over which we analyze investment ideas and themes. Hedgeye has created a process as a way of characterizing our investment ideas and their risk profiles, to fit the investing strategies and preferences of our subscribers.

  • "Trade" is a duration of 3 weeks or less
  • "Trend" is a duration of 3 months or more
  • "Tail" is a duration of 3 years or less

Anything longer than 3 years is unpredictable


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Under Armour: EXPENSIVE

Takeaway: UA may face a tough margin stretch ahead. Great company, but we can find other stocks with better growth at a lower price.

This note was originally published October 24, 2013 at 12:03 in Retail

Under Armour: EXPENSIVE - ua1

Under Armour (UA) might have a couple tough margin quarters ahead of it.  The good news is that its finally making progress outside the United States.


UA is a great company that is coming into its own, but it may face a couple of tough margin quarters ahead. UA is one of the most expensive names in consumer, and we can find other stocks with higher quality growth at a lower price.


Given how hated UA's stock is (see our sentiment monitor in Exhibit 1) we suspected that material revenue beat followed by a better print on the EPS line would be enough to give this stock a shot in the arm.


Under Armour: EXPENSIVE - brian1


But then we flipped over to the balance sheet and a 59% boost in inventories (despite only a 25.7% boost in sales), and juxtaposed that against the -33bp erosion in Gross Margins in the quarter. Any way we slice the onion, bloated inventories and weakening gross margins hardly inspires confidence in any financial model.  In fact it is almost always a precursor to additional gross margin weakness.



Under Armour: EXPENSIVE - UAsigma

Also, footwear sales were up 28% in the quarter. Don't get us wrong -- that's a great number for most brands. This isn't most brands -- it's UnderArmour. A few years ago when the footwear product used to -- well…stink -- we'd expect sub par growth. But the brand has finally figured out its identity and has put out product that consumers actually want to wear -- -both men and women. But does this add up to 28% growth? We'd think something greater -- perhaps even 2x (at least if it wants to maintain a 48x forward multiple.)


Under Armour: EXPENSIVE - UAPE

Let's put that multiple into perspective for a minute… UA is expensive -- period. But some of the best stocks in the market are expensive (and some of the worst stocks are cheap). We're not a fan of PE/Growth multiples. But when looked at alongside other high growth peers it certainly puts things into perspective we can get a good sense as to relative value.  SO let's do that…lets compare UA against a who's who of high-flying consumer growth names. We're talking everything from TSLA, CMG, AMZN, UA, NFLX, KORS, NKE, WWW, RL, FNP, FNP and RH.  Unfortunately for UA, it tips the scale along with TSLA, AMZN and NFLIX at 2.0x PEG.  As an aside, our favorite name is RH -- the cheapest name on the page.



There were definitely some things we liked this quarter, and those focused on the areas where UA has been damaged goods in the past -- The biggest of those is International where It just opened up a huge Brands experience store in Shanghai, which is a great idea no matter how you slice it.  For the first time in…well, ever…it looks like UA can get 10% of its sales outside of these United States. That would be a big valuation kicker for US, because there's a fair sized contingent that thinks UA is forever rooted in the US. We disagree, by the way. Secondly, womens continues to outpace the company's overall growth rate, and now accounts for about 30% of total revenues. To put that into perspective, Nike announced last week that it's targeting its women's business to account for 24% of revenues by 2018. UA, already has a well established women's product, and if womens were to account for nearly half of the business in the years to come as company management indicated that could be a serious growth opportunity.

European Banking Monitor: Further Improvement

Below are key European banking risk monitors, which are included as part of Josh Steiner and the Financial team's "Monday Morning Risk Monitor".  If you'd like to receive the work of the Financials team or request a trial please email .




European Financial CDS - Swaps widened modestly in Europe last week, rising by an average 4 bps (median: +2 bps).  


European Banking Monitor: Further Improvement - z. banks


Sovereign CDS – Sovereign swaps showed further improvement across Europe with the exception of Germany, which widened by 3 bps, though still trades well inside of the US. Interestingly, the US widened again last week, adding 3 bps and rising to 37 bps. 


European Banking Monitor: Further Improvement - z. sov 1


European Banking Monitor: Further Improvement - z. sov2


European Banking Monitor: Further Improvement - z. sov3


Euribor-OIS Spread – The Euribor-OIS spread tightened by 1 bps to 11 bps. The Euribor-OIS spread (the difference between the euro interbank lending rate and overnight indexed swaps) measures bank counterparty risk in the Eurozone. The OIS is analogous to the effective Fed Funds rate in the United States.  Banks lending at the OIS do not swap principal, so counterparty risk in the OIS is minimal.  By contrast, the Euribor rate is the rate offered for unsecured interbank lending.  Thus, the spread between the two isolates counterparty risk. 


European Banking Monitor: Further Improvement - z. euribor

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