Cineplex Inc (CGX.TO)

The good news about Star Wars is already priced in. It pays a healthy dividend. Compared to US theater companies, it is very expensive. CKEC-N is his preference as it trades at a discount.

Chart looks pretty favourable. He likes when there is an advance followed by a corrective period. If the corrective period is flat and congested, that is usually fairly bullish. Thinks it is going to break out and he wouldn’t be afraid of it.

Has a great dominant franchise in terms of its branding structure. Very, very strong management and execution. A strategically managed type of company. In the near term, Q4 spilling into 2016 has a very strong line-up of movie releases. This is going to be a major boost for earnings. 2016 is expected to be the year of the blockbuster with many, many films coming out. They are diversifying into such things as amusement gaming, the entertainment & casual dining. Digital media is getting very big. VIP scheme has been very strong for them. Dividend yield of 3.07% and will grow about 5% a year over the next several years.

Sold his holdings. Still thinks it is a good stock. He likes the company and the business they are in, but it is a little expensive here. If it sold back down to $38, he’d be back into this.

Star Wars, Star Wars, Star Wars. It is one of those superb businesses that have a moat around them. They have over 70% of screens in Canada. Great food and media sales around their franchise. We are entering the strongest quarter in movie history. All the good news is not priced in yet.

They basically consolidated the whole theatre business in Canada, and are using their cash flow to go into adjacent areas of entertainment. Management is very judicious in their use of capital. They generate lots of earnings and net margins off of concessions, and continually reinvest in their theatres. He likes this company, but valuation would keep him away.

Technically there is some support at around $37 from 2014. When the August correction took place, it did not come down to its support, which is a positive. From a technical perspective, if it holds the support, that would be a positive sign. If it breaks below $36-$37, we are actually in trouble.

(A Top Pick Oct 21/14.) (A Short. Down 15.36%.) Thinks this is a classical, over-owned Canadian name. It is a name that institutional managers love to own, so as a consequence it trades at 40X last year’s earnings, at about 29X this year’s. Putting it in perspective, you can go south of the border and get a name that is larger, more liquid, and trading at about two thirds of the valuation.

(Top Pick Aug 19/14, Up 20.82%) They are good at driving traffic into their theatres. They did well even though they have no control over their movie slate.

(Top Pick Sept 22, 2014, up 20% ) Had a strong summer of movies, (Mission Impossible, Star Wars) Strong summer, likes this company and has owned for years.

(A Top Pick July 21/14. Up 26.5%.) Valuation is high because it is well-managed. There isn’t too much choice in Canada. Yield of about 3.2%. He thinks that for the rest of this year there continues to be a very good slate of movies coming. Really well managed. Getting close to where they can’t grow near as much because there are not going to be as many things left to do. A nice defensive place, so far, to hide in.

(A Top Pick Aug 14/14. Down 29.56%.) A Short. Started shorting this at around 23-24 times earnings. Earnings didn’t grow that much last year, but now it is almost 30X earnings. He is still Short. They had 80% of the theatre seats in Canada when they did the last acquisition. Thinks their prices are too high. The US box office is up around 7%-8% year-to-date while the Canadian box office is almost flat. Canadians are not going out to watch movies.

(A Top Pick Aug 6/14. Up 25.22%.) The movie box office has never been stronger. In the last quarter there were 3 movies that are in the top 6 movies of all time. This is a money machine. In many of their locations they have built the full spectrum. While you are watching a movie, you can have dinner in your seat, you can have a drink, etc. Have a huge market share in Canada. Dividend yield of 3.22%.

Long Cinemark CNK-N/ Short Cineplex CGX-T. Pairs trade. Feels Cineplex is an overowned/overvalued name at 77% market share in Canada. Cinemark trades at 30% discount. The pairs trade takes out the box office risk.

By and large, this has been pretty expensive. It has come down some. They have some interesting things transpiring. They are building out a new restaurant/entertainment centre, which he thinks is going to be a success. Have been doing a really good job of developing their other businesses. Trading at a level that is slightly below their 5 year average.