Behold Rising Volatility, Entropy and the Waterfall of Risk Ahead of Fed’s Decision


In this brief excerpt from today’s Macro Show, Hedgeye CEO Keith McCullough discusses the growing risks facing investors ahead of the FOMC policy statement at 2PM ET.

Keith's Macro Notebook 3/18: Oil | VIX | Russell 2000


Hedgeye CEO Keith McCullough shares the top three things in his macro notebook this morning.

PENN: Removing Penn National Gaming from Investing Ideas

Takeaway: We are removing PENN from Investing Ideas.

Please note that we are removing Penn National Gaming (PENN) from Investing Ideas today. PENN was added on 2/24/15 and is up 1.4% versus a 2.2% decline in the S&P 500.


According to Hedgeye Gaming, Lodging & Leisure Sector Head Todd Jordan: 


"We continue to like PENN over the intermediate and long term but negative same store revs in March could pressure regional gaming stocks."


In addition: 

  • We’re forecasting a return to negative same store revenue in the regional gaming markets following 3 straight months of gains.  A monthly downturn would counter the recent regional gaming narrative and could hurt sentiment and the stocks: BYD, PENN, PNK, and GLPI
  • We are removing PENN even though the company’s return to growth in beginning in 2H 2015 should drive a higher stock price.  Our concern rests with the potential reversal in sentiment as March gaming revenues are released by the states in early April.
  • Early weekly revenue read from a few markets is mixed as a much weaker Pennsylvania was offset by a stronger Missouri. 

PENN: Removing Penn National Gaming from Investing Ideas - zj


Early Look

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  • DoubleDown: highest rate of monetization per social user
  • Will continue to invest in R&D (IGT: ~$200m, GTECH: ~$100m)
  • Growing market share in instant ticket printing: currently 12%
  • Partnered with MGM with interactive sports-betting and gaming opportunity
  • Interactive business: skewed towards B2C, compared with B2B
  • Atronic/Spielo:  in the early years, had negative EBITDA. Big turnaround.
  • Consumers want content across different platforms
  • iLottery UK: 70% of offering
  • Combined company LTM ending Dec 2014
    • $6.048bn revs
    • $2.039 BN EBITDA
  • 2015/2016 Capex: will not include Lotto.  When it is stable in 2017, they will include it. 
  • Synergy chart - opportunities in SG&A


  • Revenue synergies of $50m is 'low hanging fruit'
  • Want IGT to have a presence in Italy
  • Net debt/adjusted EBITDA: <4x 
  • Dividend policy: transition to quarterly dividends.  Advise Board to issue stable dividend in dollars, in-line with historical GTECH #s
  • Sustained pressure on IGT.  
  • Expect some headwinds from currency as they move euros to dollars.
  • Combined 2015 guidance no later than Q2 15 results
  • Maintenance capex historically €170-€220 million for GTECH 
  • IGT capex historically $60-$100 million 
  • 2015 / 2016 / 2017 also impacted by Italian Lotto renewal (€350m / €250m / remainder)

Q & A

  • Being outbid in Turkey - GTECH thinks their competitors were too aggressive. 
  • B2C:  sees opportunity to become lottery operator
  • $300m capex:  most of it will be gaming operations and a little bit of interactive. Lottery don't need much capex.
  • Will assess IGT's team and get the best talent

RTA Live: March 18, 2015

Hedgeye CEO Keith McCullough breaks down the current Real-Time Alerts positions and answers viewer questions.


REPLAY | Fed Coverage Hosted By Hedgeye CEO Keith McCullough



Keith provided unobstructed, real-time commentary regarding the impact today’s FOMC decision and language have on markets with 10yr yields retesting 2% this morning, USD strength, oil crashing (WTI -21% YTD), and other key factors.




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This indispensable trading tool is based on a risk management signaling process Hedgeye CEO Keith McCullough developed during his years as a hedge fund manager and continues to refine. Nearly every trading day, you’ll receive Keith’s latest signals - buy, sell, short or cover.