Cineplex Inc (CGX.TO)

He has never owned it because he is one of their best customers. He has been finding that it is difficult to decide what to go and see and sometimes he considers not seeing anything. They cannot pick and choose what to sell. If it is a great movie season they benefit, but if it is bad they suffer. The movies are the tail that wags the dog. He has yet to see where this movie season is going to turn around.

It is a falling knife. It has had a collapse failing its recent earnings report. It has a gap. It is very oversold right now. You could potentially play a rebound trade, but it would be very short lived and volatile. A trend has broken.

He sold it. They can only do so much. They are trying to diversify. By 2020 they want to be only one third exhibition business. They had an earnings miss. They spent captial, but have not realized the benefits yet. If they miss next quarter that is the buying opportunity. Buy it in thirds over the next 3-5 years.

(A Top Pick Aug 16/16. Down 13.43%.) Reported last week and the stock got hit fairly badly, and is down 15% since it reported. A very attractive opportunity to get into the stock. They closed down about 11 theatres to retrofit the seating, which should benefit them in the future. Thinks the company is trying to diversify away from the theatre base. Dividend yield of about 4%. If you don’t own, she would use this pricing to build a position.

It has gone up way, way too high to be of interest. Revenues come from many different things other than films. This is an industry that is going to continue one way or another.

There has been a very interesting change in their business model. We saw the negative consequences last week when they put their earnings out. They continue to grow revenue per client, which is a wonderful metric that works over time. There is an interesting morphing of their business model which he likes. This is a monopoly. A good time to pick this up. Dividend yield of 3.8%. (Analysts’ price target is $50.)

This is kind of short-term risk and long-term money. The short-term wasn’t a great quarter when they missed. A lot of their results are dependent on the movie slate that they get. The company has been efficient at driving revenues per user and increasing margins at their retail outlets. He likes the steps they are taking to diversify their revenues. You don’t need to rush into it today, but as a long-term goal, this is fine.

The summer picture season is not as dramatic as it was last year. We recently had a break of support back to March. Now is not a good time to buy it. It is in a downward trend. There may be interesting potentials closer to the end of the year.

He likes the fact that it is a pretty recession-proof stock. It is a lot more than movie tickets. They have really built up gaming. The PE has been high for quite some time. It is not that elevated a PE considering its resilience, however. It is a good idea to pick away at it. You know you will keep getting dividend increases.

Downgraded by National Bank (NA-T) from $60-$56. Thinks it was partially because US movie distributors had been underperforming in 2017. The concern is the same every year that nobody is going to go to the movies, they charge too much, the movies are crap, etc. Yet, they had record box office in 2016, and will probably have another in 2017. They’ve diversified revenues and are opening up the rec rooms. A premium company that has never missed on their operations.

This fell 4.2% today as the National Bank (NA-T) cut its rating to “Sector Perform” from Outperform. A buying opportunity for the long-term. Rather than a cinema company, this is really a fabulous popcorn company as well as introducing some new things.

* Short * Pairs Trade: *Long* CNK-N/ *Short* CGX-T. Canadian long only managers always buy CGX-T as a recession proof business. It is a good company, but very expensive. It is twice the valuation of CNK-N.(Analysts’ target: $58.50). CNK-N is more focused on the cinema business. It has 3 times more screens. It is a bigger, more liquid name and has a better dividend yield. (Analysts’ target: $44.00).

(A Top Pick July 5/16. Up 4.70%.) Pretty close to a monopoly in showing films in Canada. He is buying it, not so much for the films, but for the popcorn and the things happening outside of the films. A great name to hold for the long-term.

This stock is buffeted by the fact that it is totally dependent on someone else for their product. If it is a hot season for movies, they are going to do well. If it’s not, they don’t get the bums into the seats in order to sell popcorn, which is where they make their money. To their credit, they have been diversifying away into other forms of entertainment distribution and game rooms. They are doing the right things. It has been a decent place to be, and probably will continue to be.

This had a very solid top line growth in Q1, and he raised his outlook for a better box office in 2017. He sees really nice growth in Digital media and gaming and sees 23% EPS. Trading below its five-year average. However, at 30X earnings, it is still pretty pricey, and vulnerable to a bit of a hiccup. A lot of growth is tied to a successful rollout of their rec room. If they hook up on that, then it is a little pricey, but all in, a name that is probably good here. You could probably sell some Puts, oblige yourself to own it at around $48, get paid a little bit.