LGF is releasing its final movie of the teen mega blockbuster twilight today. The franchise has been widely popular and has been a boon to the relatively small movie production company Lions Gate Films. Typically upon movie releases for LGF we see a run up in the stock prior to the release and then a sell off upon release. Typical for Hollywood to buy the rumor and sell the news. There are signs this time might be different, Early returns are already strong, with one report stating that the film grossed 30.4 million from screenings at 10 pm last night and at least one investor is planning on this final addition to buck the trend and beat expectations on this opening weekend. In one trade an investor bought 600 December 17 calls for .29 cents. He is outlaying $17,400 to get long 60,000 shares over 17. This is an attractive way to play the upside in this stock; we have a defined risk, and don’t lose any more than our original capital if the stock does indeed sell on the news.
One of the questions I get most from clients is how to generate yield when the Fed is on hold with rates at zero. For a while many defensive clients were content receiving their 3% annual yield from Treasury bonds, but the Fed’s most recent meeting minutes shows that the Fed’s pace of bond buying may soon slow. While I do not think tapering is likely before year end (unless economic data accelerates significantly) the bond market is forward looking and already beginning to price tapering in. Smaller Fed purchases of Treasury bonds will mean that bond yields go up and bond prices go down. Bonds have been in a multi-year bull market, and we may now be on the cusp of a multi-year bear market. The most important indicator to watch is the 10-year yield, which cracked the 2.10% level this week for the first time in a year. If we continue to hold above 2.05% in June, the top is likely in for bonds and borrowing rates will be on the rise for everyone, including the US Treasury. So, how am ...
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