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Our comprehensive Industry Focus: Consumer Goods podcast on casino operators and the gaming industry in 2019 begins with an overview of recent activist investments in MGM Resorts International (MGM -0.35%) and Caesars Entertainment (CZR). In this segment, host Nick Sciple and contributor Asit Sharma discuss what might be in store for these industry-leading companies as hedge funds descend on Vegas.

A full transcript follows the video.

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This video was recorded on Jan. 15, 2019.

Nick Sciple: We picked a good week to talk about casinos, Asit. We hadn't planned this, but just in the past week, some news as we've seen some activists taking stakes in the major U.S. casinos. We have activist firm Starboard Value reportedly building a stake in MGM Resorts, and Carl Icahn -- everybody knows Carl Icahn, one of the largest activist investors out there -- has reportedly taken a stake in Caesars. Icahn does have some casino experience. He sold a $1.5 billion stake in Tropicana Entertainment in 2018, and also sold the Trump Taj Mahal in Atlantic City to the Hard Rock last year.

This isn't the first interest we've seen in Caesars. Earlier this year, Tilman Fertitta, the owner of the Houston Rockets and Landry's, which also owns the Golden Nugget Casino and Morton's Steakhouses, he offered $13 a share in cash and stock for Caesars in October, but that offer was turned down.

We've got a lot of sharks circling around these major U.S. casino businesses, Asit. What's your take on all this activist interest coming out recently?

Asit Sharma: Well, first of all, I want to say that I think all these activist investors got wind that you and I were going to do a podcast episode. That's why their interest suddenly picked up, and that's why we're hearing this in the news cycle. [laughs]

Let's start with MGM. Apparently, this stake was built in the last three months. I took a look at Starboard's most recent 13-F filing, that's a filing that big hedge funds and private equity groups have to do for disclosure, it shows their institutional holdings. They didn't have an appreciable stake as of their last reporting period, which ended 9/30 of 2018. In a few weeks, we'll see what their holdings were as of the end of the year.

Interestingly, as Starboard was putting this position together, MGM management was probably polishing off the final touches on a plan to free up about $300 million in EBITDA -- earnings before interest, taxes, depreciation and amortization -- out of coincidence or management having the feeling that it's possible, if they don't prove their profitability and earnings structure soon, there could be some activist interest.

Starboard Value, as its name implies, is a value investor. They tend to acquire companies which are beaten down in some ways. This is not one of the activist investors that tries to have an adversarial relationship with management teams, but it often has big plans for companies that it takes significant stakes in.

One that I wanted to talk about, which was also announced after the year turned, was Starboard's stake in Dollar Tree, which owns Family Dollar. Just to give you an example of how this hedge fund operates, they want Dollar Tree to sell off Family Dollar, which it only acquired three years ago, because it's been a money-losing proposition for that company, and it wants the Dollar Tree brand to expand its price points from $1 to multiple price points. So, big changes. That gives you the flavor of how this company might tack on as it tries to influence management at MGM.

Basically, going forward, there's not a lot for MGM left to do. Many times, these companies want management to buy back shares. That should increase stock value. But MGM is highly leveraged, so I don't see much that can go on in that manner.

On this next idea, which is Carl Icahn's interest in Caesars, that's also interesting. It should be fun to watch. Carl Icahn of Trian Partners is famous for producing these voluminous white papers, 80-page, 100-page white papers which argue for a big change in the companies that he takes stakes in. I don't know if we'll see that with Caesars. But Caesars, again, is another company which has a lot of leverage on its balance sheet. It just came out of bankruptcy recently. Icahn is a master at finding every last penny of value. I'm going to be interested to see how this one unfolds. Any thoughts from you on either of these?

Sciple: It's hard to tell. The big catalyst that we saw in the last year, at least in the gaming space, is sports betting. Part of what's going to happen there is going to depend on what we get from a regulatory point of view. The Justice Department came out with a new stance on how the Wire Act should be applied to online gambling just yesterday, Monday afternoon. That's going to affect the ability for some of these casinos to roll out casino-like games through their apps and things like that. There are some regulatory hurdles that look like they're creating a little bit of a special situation for these businesses. Maybe the activists see something in the tea leaves there that they can pull the thread on.

I do think, when you look at the leverage of these companies, there's got to be something to address those issues. You've seen some interesting things with the real estate arms of both MGM and Caesars. We're going to talk about that later. I'm interested to see what role, maybe unlocking some value out of the real estate might play in what goes on there. It's going to be an interesting thing to follow. There's a lot of moving parts.