There is little doubt that GLPI’s split from PENN created tremendous shareholder value. So, why can’t other gaming companies like BYD, ISLE, LVS, MGM, PNK, or WYNN pursue similar value-creating transactions?


There is growing speculation that BYD could be next to follow the PENN route, now that an activist and real estate focused investor has taken a big stake in the stock.


We’re delighted to tackle this issue head on next Tuesday, March 18 at 11am, with Ed Glazer, Partner at Goodwin Procter, who has extensive experience with REITs and currently represents the only casino REIT – Gaming and Leisure Properties (GLPI).


We will tackle pertinent issues on our call including:

  • The case for casino REITs
  • Taxable vs non-taxable spin
  • REIT spin mechanics
  • The potential impact of proposed legislation
  • BYD:  A case study
    • Discussion of Issues
    • Discussion of Potential Complexities
    • Post Transaction Valuations

For dial-in details, please contact .


Edward Glazer

Ed Glazer is a partner in the firm's Tax Practice and its nationally recognized Real Estate, REITs & Real Estate Capital Markets Group. He focuses principally on structuring and implementing tax-oriented commercial transactions of all types, including real estate and venture capital transactions, mergers and acquisitions, pension investments in real estate involving issues of unrelated business taxable income, leveraged financings, and workout and debt restructurings. Mr. Glazer regularly advises clients in structuring collective investment vehicles, in structuring real estate securitizations, in forming and operating public and private REITs and in forming real estate funds.

Stock Report: Owens Corning (OC)

Stock Report: Owens Corning (OC) - HE OC table 3 14 14


Construction activity remains cyclically depressed, but has likely begun the long process of recovery.  A large multi-year rebound in construction should provide a tailwind to OC shares that the market appears to be underestimating.  Both residential and nonresidential construction in the U.S. would need to roughly double to reach post-war demographic norms.  As credit returns to the market and government funded construction begins to rebound, construction markets should make steady gains in coming years, quarterly weather aside, supporting OC’s revenue and capacity utilization. 


OC’s markets have improved structurally over the past decade.  Both OC and many of its competitors filed for bankruptcy in the late 1990s/early 2000s to free themselves from asbestos liabilities.  With those matters resolved, many areas of the building products industries have emerged into more consolidated industries with fairly rational competitors.   Regulations, such as building codes, should also support demand for many of OC’s products.


A significant, multi-year rebound in OC’s end-markets combined with structural improvement should allow the shares to be rerated by the market.


Stock Report: Owens Corning (OC) - chart



INTERMEDIATE TERM (TREND) (the next 3 months or more)

We estimate that more than half of OC sales are to supply new construction projects, so a gradual trend of rebounding construction activity should provide a tailwind.   While there may be volatility in 1Q construction activity, bad weather can also increase demand for certain OC roofing products.  We also expect to see continued improvement in OC’s insulation margins in 1H 2014, a segment where returns have the most rebound potential.  



LONG-TERM (TAIL) (the next 3 years or less)

Our base-case valuation range for OC is $60-$70/share, which is attractive relative to the alternatives in the Industrials sector.  We expect the residential and nonresidential new construction recoveries to be reasonably simultaneous in coming years, driving higher capacity utilization and pricing for OC and other building products companies.


OC is not a member of an S&P Index, which it was prior to 2000, and recently restarted a dividend.  Both are potential positives.  After roughly six years in asbestos-related bankruptcy and having its end-markets evaporate in the financial crisis, we think OC has a lot more earnings and cash generation potential in coming years than the current valuation reflects.  




Stock Report: Owens Corning (OC) - HE OC chart 3 14 14

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

VIDEO | Keith's Macro Notebook 3/14: SPX EUROPE OIL

Bubbly: SP500 Levels, Refreshed

Takeaway: I might consider chasing the mo-mo on the upside, if the fundamental research view supported it – but it doesn’t.

Editor's note: This unlocked research note from CEO Keith McCullough was originally published March 10, 2014 at 10:44 in Macro. For more information on our services click here.



If the buck wasn’t burning and #InflationAccelerating wasn’t slowing US growth, I wouldn’t be selling on immediate-term TRADE overbought signals. Consensus hasn’t acknowledged the inflation impact on 2014 growth (yet), and I like that.


Bubbly: SP500 Levels, Refreshed - bubb


To call it a bubble isn’t a big deal. I called it a bubble when I was buying it all of last year (remember: #BTDB – buy-the-damn-bubble). What else would you call the all-time highs in prices?


Across our core risk management durations, here are the lines that matter to me most:

  1. Immediate-term TRADE overbought = 1888
  2. Immediate-term TRADE support = 1864
  3. Intermediate-term TREND support = 1805

In other words, why would you buy an overbought price if you have 4% mean reversion downside to the TREND line of 1805? I might consider chasing the mo-mo on the upside, if the fundamental research view supported it – but it doesn’t.


Let’s see if 1864 holds. Then we reset.




Keith McCullough

Chief Executive Officer


Bubbly: SP500 Levels, Refreshed - km1

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Client Talking Points


At first risk happens slowly, and then it comes all at once...The S&P 500 has dropped back into the red for the year-to-date (The Dow is down -2.8% YTD) on an accelerating volume signal yesterday with VIX (volatility) confirming our TREND breakout above 14.71 earlier in the week . Study the factors in the bounce this morning. They’ll matter.


Both the DAX and Eurostoxx600 have also snapped my Hedgeye TREND signal lines this week. That’s new. For the record, no, I do not like this Janet-Yellen-sounding ECB President Mario Draghi talking about price fixing “forward guidance to curb Euro strength.” Not one bit.


Oil also broke our TREND duration signal line of $108.07 TREND support this week. Incidentally, with #InflationAccelerating, that’s probably the only good thing on my screen this morning for the U.S. consumer. Meanwhile, Consumer Discretionary (XLY) is down -1.4% year-to-date. Sorry.

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

We remain bullish on the British Pound versus the US Dollar, a position supported over the intermediate term TREND by prudent management of interest rate policy from Mark Carney at the BOE (oriented towards hiking rather than cutting as conditions improve) and the Bank maintaining its existing asset purchase program (QE). UK high frequency data continues to offer evidence of emergent strength in the economy, and in many cases the data is outperforming that of its western European peers, which should provide further strength to the currency. In short, we believe a strengthening UK economy coupled with the comparative hawkishness of the BOE (vs. Yellen et al.) will further perpetuate #StrongPound over the intermediate term.


Darden is the world’s largest full service restaurant company. The company operates +2000 restaurants in the U.S. and Canada, including Olive Garden, Red Lobster, LongHorn and Capital Grille. Management has been under a firestorm of criticism for poor performance. Hedgeye's Howard Penney has been at the forefront of this activist movement since early 2013, when he first identified the potential for unleashing significant value creation for Darden shareholders. Less than a year later, it looks like Penney’s plan is coming to fruition. Penney (who thinks DRI is grossly mismanaged and in need of a major overhaul) believes activists will drive material change at Darden. This would obviously be extremely bullish for shareholders and could happen fairly soon driving shares materially higher.

Three for the Road


4 of 9 sectors in our S&P Sector Risk Model are bearish on our TRADE duration; 5 are bullish @KeithMcCullough


"Efforts and courage are not enough without purpose and direction." - John F. Kennedy


The rich may have finally shaken off the recession. The number of U.S. households with a net worth of $1 million or more, excluding a primary residence, rose to 9.63 million in 2013, according to a new report from Spectrem Group, a consulting and research firm. That's more than a 600,000 leap up from 2012, and the highest number on record. (CNN)

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