Why I Considered Selling Novo to Buy Vici And What (and why) I Actually Did Instead

As the team finalizes the last of the rating calibrations and Connor works on that optimization report for me, given the meeting (and doctor appointment) packed day today, I am doing a short and sweet ZEUS update, based on two exciting things I noticed from yesterday’s meetings with Connor and Glenn. Given that the full calibration is not yet complete, I’ll manually analyze both Novo and Vici for this article. I just had an exciting meeting with Connor, where we discussed both companies (Vici mostly), so this article is a mini-research report that is “inside baseball. I am literally publishing this right before I have to leave for a Doctor’s appointment. When I get back, Connor will have the ZEUS optimization report ready for me. To take advantage of tax-loss harvesting opportunities, I have to make any trades by Wednesday, Dec 31st, before the market closes (the market closes at the regular 4 PM EST on New Year’s Eve). Fact 1: Novo’s Near-Term Growth Outlook Has Significantly Deteriorated A few months ago, NOVO’s growth outlook for 2026 had declined by 28%. The 2026 EPS median consensus remained stable at $4.5 to $4.7 all year until after Q2 earnings, when it fell sharply and has continued to deteriorate. Source: FactSet The 2027 estimates were steady at $5.4 and then rapidly deteriorated to $3.67 (a 31% decline). Source: FactSet The 2028 estimates have deteriorated by 25%. Source: FactSet The 2029 estimates have fallen 22%. Source: FactSet The 2030 estimates have fallen 13%. Source: FAST Graphs, FactSet The good news is the 2027 total return potential remains a solid 81% or a 34% CAGR… except for one thing. For 2 years, earnings growth will be flat, and that MIGHT mean that the reversion to historical 24X earnings won’t actually happen. In the past, during periods of flat growth, NVO has traded at historically normal 24X earnings about 50% of the time, and at other times at a range of 16 to 18. Source: FAST Graphs, FactSet At a 17 PE by the end of 2027, we’re looking at a potential 29% gain (instead of 81%) and a solid 14% CAGR total return potential, though that’s roughly what Morningstar expects from the S&P over this time period. Deep Value positions like NVO target 3X returns over 5 years (the Venture Capital standard rule of thumb) or a 24% CAGR. And of course, there is no guarantee that NVO’s estimates won’t keep falling if pricing pressure on its GLP-1 drugs continues (China and the US are both trying to reduce prices). Fact 2: Vici Properties Looks Like It’s Offering A Very Attractive (And Somewhat Less Speculative) Medium-Term Deep Value Opportunity - At First VICI Properties: The 6.3% Yield Casino Landlord Trading Like the House Always Loses Glenn’s analysis is right on the money when it comes to sound reasoning and a prudent, high-reward/relatively low-risk (investment-grade credit rating) triple-net lease REIT: Vici. We spent about 20 minutes yesterday discussing the Vici opportunity, and here is what I thought I’d add to the analysis he already did. I was excited by the strong fundamentals, including a 65% payout ratio (exceptionally strong for a triple-net lease REIT, where 90% is safe), a leverage ratio of 5, which has been drifting lower, and an interest coverage of 4 (and rising over time). 6X leverage (debt/EBITDA) is safe for most REITs, including triple-net-lease REITs like Vici. 2+ interest coverage is safe. I also liked that Vici had a stable BBB- (investment-grade) credit rating, and, legally speaking, even if Caesar’s or MGM were to shut down a Casino, leases are senior to even senior debt in the capital stack (even in Bankruptcy). Remember Uniti Group (the fiber optics triple net lease REIT)? That’s where we learned about the REALLY intricate details of what happens to NNN leases duringthe bankruptcy of the primary tenant. In other words, even if MGM or Caesar’s were to say “We’re shutting down the MGM