Cineplex Inc (CGX.TO)

Has lost altitude, partly because of Hollywood’s bad products. Is the decline in attendance systemic or cyclical? She thinks it is cyclical. They’ve put in initiatives to diversify away from the box office, including growing its digital media business, eSports franchise, and opening Rec Room restaurants. Dividend yield of 4.7%. (Analysts’ price target is $44.50.)

Expects there will be a little more tax loss selling on this. Hasn't owned this for years and years because he finds the valuation is too high for its growth profile. Big blockbuster movies will come and go, which will give you kind of a lumpy earnings. They are trying to diversify a little into related businesses. There are a lot of cheaper plays in media.

He had been short and has covered. The whole industry, including the US, has been under pressure. There are longer term risks. It has always traded at a premium and then they had a weak quarter. He wonders what the long term future of this company is. It is not cheap enough to make it interesting on the buy side.

It’s been nasty being a shareholder this year. It had a disastrous summer. There weren’t any good movies. Box office returns were down anywhere from 10% to 15%, which is going to hurt their bottom line. It looks like it will end the year down 1%-2% on the box office. The 2018 slate looks promising. They’ve done a great job in raising ticket prices, raising prices on food, and are light years ahead of the US competition, because they’ve expanded into other areas. Thinks they are going to be very successful. Will benefit from Sears and Target closing up shops, as they will be able to negotiate pretty good leases and acquire big sites to launch their entertainment centres. Even at $38, it is not a cheap stock, however it has a great business model. As the movies pick up, it can go a lot higher. 4.3% dividend yield.

He likes the insurance companies in the US. This recently did a spinoff of their smaller financial division. It has recently spiked over the last couple of months. Trading at 11X earnings with a decent growth rate. Insurance companies, particularly in the US, are going to move along with what is going to happen with interest rates. He likes insurance companies, but wouldn’t ignore large US banks. Dividend yield of 3%.

Fell back on a weak quarter because of a weak slate of movies. The next quarter will also be weak. For new clients, she buys a half a position, and slowly eases into it. There is nothing structurally wrong with the company, so doesn’t think the stock price will drop much further. It always trades at a premium to its US peers because of the large market share they have in Canada, over 80%. They have other revenue streams that are diversifying and growing, such as their rec rooms which have been doing quite well. Bringing E gaming into their theatres, and that sport seems to be gaining momentum. In a few years, those extras will make them less reliant on the movie slate.

Has a Short position. It is so widely held by Canadians, portfolio managers, and virtually every mutual fund. Has always traded in a band of $48 and $52. Their Q2 numbers were way down as a result of a very poor box office. People underestimated the cost of the launch of the new ventures, and it finally broke out of that band and gapped down to around $37. A good company, but trades at twice the valuation of its US peers.

Has always admired management. It’s important to understand that they don’t make movies, so if Hollywood makes lousy movies that no one wants to see, this company suffers. They have figured out something to do about this and have basically diversified their revenue. Created Rec rooms, which are basically man caves for millennials with a bar and a restaurant and a lot of great games to play. They’ve been brilliant in establishing new revenue lines. However, at the end of the day, people have to go to the movies and they have to be good movies. He is looking for a very strong 4^th quarter with strong new releases. Dividend yield of over 4%.

He likes to look at contrarian opportunities. This is a monopoly movie distribution business in Canada. It had a lousy quarter, and is going to have a lousy quarter coming up. He looks at this like a commodity. Movie cycles come and go. There is good hope on the screen looking forward. It has become a wonderful value opportunity to buy a depressed stock. Dividend yield of 4.4%. (Analysts’ price target is $48.)

Great management team that has been executing flawlessly. One little hiccup can really hammer this stock. All the cinema stocks have come down in North America. CGX-T is looking at some high growth avenues like amusement centers to grow. He is going to wait for a few quarters.

Movies have had a difficult time of late. They’ve had a very bad summer season for blockbusters. People are not as eager to go to movie theatres unless there is something really, really important they want to see. The company has done a very good job with concessions. He would wait for another quarter or so before looking at this.

Something he owned, but got out too early. Management is fantastic. The last quarter, the AMC’s release in the US scared him. They came with guidance and missed their numbers. You could skew this to the box office content. The blockbusters were not in it this year. Has a feeling that the window is smaller for theatrical releases. Also, feels there is less tendency for people to go to the movies. They have some side businesses which are really good. The concession business is decent. Their new Rec Room proposition is fantastic, but that doesn’t move the needle. Thinks there are tremendous headwinds for them.

Had been buying for new clients earlier this year and unfortunately, they are underwater. If you own, you should keep holding it. Yields over 4%, so you are getting paid to wait. The traffic into theatres was obviously soft, which she thinks was the movie slate. 2015 and 2016 were both record banner years. In the last 4-5 years, box office sales have continued to increase, as well as the number of tickets sold. Thinks the slate will improve. Management is trying to diversify out of just being in theatres, and making investments in the Rec Room, online gaming, Top Golf, etc. There is no rush to buy right away, because we know the 3^rd quarter is going to be soft. If thinking longer-term, you can slowly start to add here.

They are changing the whole concept of watching movies. They are putting in lounges and the food is better. If a little tight on money, and you want to take the family out, you can go here, perhaps have a beer, and see a good movie in a nice comfortable situation. It makes a very reasonable evening out, particularly for a family. They are improving the ambience significantly. Have had a run of crappy movies, which is part of the problem. He is watching this.

It has come down dramatically, as it is the worst in 20 years for a movie slate. He bought aggressively. They have a 72% market share in Canada and are diversifying. Hollywood has to stop serving dog food and bring back caviar. 2018 should be a better year for movies.