What I'm Trading

Sunday, May 30, 2010

What We've Learned this Weekend: 5/30/10

While the Memorial Day Weekend churns along, it's never too early to learn our box office lessons.

What did I learn this weekend? Stop being so damn jittery over Friday grosses and market reaction. As we have established throughout this year, the Hollywood Stock Exchange is rarely a rational market, especially during the throes of an opening weekend. 


As you may see in our portfolio, I have divested our short position on SEX AND THE CITY 2, having chucked it at $137, giddy with a 26% profit, assuming it couldn't fall any further for a realistic 24 day output. Au contraire, mes freres. With an anticipated five day opening haul of $49.21 mil, SATC2's 24 day take should range between $100.63 to $132.87 mil, depending on whether you want to apply the 2.7 multiplier by the movie's first actual three days or its 5 day weekend. Being somewhat conservative - and seeing how the first SATC grossed $132 mil in its initial 24 days - I will take the latter number of $132.87 for its predicted 24 day take. So we left about $5/share on the table. My bad.


But we used the profits from SATC2 to fuel our turnaround on PRINCE OF PERSIA and deepen our position on THE KARATE KID. With PERSIA, I quickly abandoned our $173 short position at $105 for a healthy 40% profit after having seen it on Friday and how much fun and potentially leggy the movie might be. With it having dropped to about $89 before jumping back in and going long on it, yes, once again, money was left on the table. However, this film's true price is somewhere between $102-110. With it up almost $5 in a day, we feel comfortable sitting on this one for the long haul and letting the market decide its true delist price. After reading a quote from a Sony chief saying that THE KARATE KID had tested higher than almost any film in its history, further fueling my own sense at its box office potential, it was time to beef up our position in this film. It may not do TWILIGHT numbers, but there is still money to be had going long at $105 on this sure-fire four quadrant hit.


So there - lesson learned. Before we start panic trading off of Friday numbers, it's good to give it at least until Sunday morning to truly see which way the wind is blowing. We have also learned that people don't react to the early numbers on Sunday morning. With IRON MAN 2 set to delist around $274, who ARE these nimrods who are holding onto it at $288 right now??? Only one question from this weekend remains: What to do with all your IM2 profits?


If you got in when we did, going short at $404 for a whopping 32% and $129 gain at this point, that's a lot of jingle jangling in your pockets. Whatever to spend it on? My humble suggestions, while still fairly cheap:


KARATE KID: long
TWILIGHT ECLIPSE: short (SJP)
TOY STORY 3: short (SJP)
SHREK 4: short (yes, even at $221, it's at least $30 overvalued)
SORCERER'S APPRENTICE: short (SJP)


There you have it. Your next moves, with the notable SJPs (Sarah Jessica Parkers/wildly overvalued stocks) plainly marked. Enjoy the rest of the weekend. Stay valued, my friends.

Posted by JCM Cinema Capital at 11:30 AM
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