Bear Market Takes Down AMC - Buying Opportunity?

AMC Entertainment Holdings Inc. (AMC) has been mauled by the bear during the fourth quarter stock market rout along with the broader indices. Despite a record-breaking year at the box office for 2018, AMC saw its stock plummet from ~$20 to ~$12 per share or shedding 40% of its market value. The stock currently sits at ~$13.50 or still over 30% off its 52-week high representing a compelling buy in the backdrop of a record-setting year at the box office, robust slate of movies for 2019, rapidly growing loyalty program with over 600,000 members, a strong consumer, dividend yield of over 5% and accelerating revenue and EPS growth. AMC is reengaging the consumer via digital, mobile and loyalty program options, reformatting theaters to enhance the user experience and international expansion augmented by a healthy share buyback program.

Furthermore, AMC has established relationships with Facebook (FB) and Groupon (GRPN) to drive ticket sales to AMC theaters. The stock looks very attractive considering its depressed valuation, industry strength forecasted through 2019 coupled with a slew of company initiatives to drive the consumer experience. The long term growth narrative remains intact while revenue continues to grow at a healthy clip.

AMC Continues Improving Business – Q3 Earnings

AMC has been establishing firm footing of improving fundamentals across the entire enterprise which were highlighted during its latest earnings announcement for Q3 2018. For the first none months ending September 30th, total revenues increased 10.5% to $4,047.5 million. Admissions revenues grew 8.2% to $2,522.7 million while attendance increased globally by 4.1% and increased by 6.4% in the U.S. Food and beverage revenues increased 9.1% to $1,236.4 million and other revenues increased 46.5% to $288.4 million. AMC is poised to post company records for the full year 2018 in all revenue categories: admissions, food and beverage and other. Continue reading "Bear Market Takes Down AMC - Buying Opportunity?"

Disney - Compelling Long-Term Investment In 2019 and Beyond

Stocks are entering 2019 in bear market territory and posted its worse quarter since the Great Depression after imploding in Q4 of 2018. Disney (DIS) has been a diamond in the rough given the negative backdrop albeit down from its 52-week high by 8%. This stock has bucked the negative trend and has demonstrated its resilience during this period. As this sell-off presents itself, long-term investors may want to take advantage of this weakness and initiate a position in this high-quality company at a discount. All the initiatives that Disney has taken over the previous two years to restore growth appear to be coming to fruition, namely its Fox (FOX) acquisition and its streaming initiatives. The Fox acquisition is complete now that the U.S. and China provided the green light for the combined entity thus Fox’s assets are now definitively being absorbed by Disney. As part of the contingencies, Disney is divesting its 39% Sky ownership stake that it acquired via the Fox acquisition to Comcast (CMCSA). This divestiture enables Disney to reduce its debt that was required to purchase the Fox media assets and will allow more investment into its streaming services such as Hulu, ESPN Plus and its Disney branded streaming service that will directly compete with Netflix (NFLX). The Fox acquisition brings a majority stake in Hulu (60% ownership) while its ESPN Plus launched earlier this year and had over 1 million subscribers in its early phases of being rolled out. Disney continues to dominate at the box office while posting great growth at its theme parks translating into a robust and durable revenue stream. The company is evolving to meet the new age of media consumption demands of the consumer via streaming and on-demand content. To this end, shareholders and analysts are beginning to resonate with Disney’s vision for future growth. This was reflected in its stock and had appreciated to a 52-week high before the market wide meltdown. Disney offers a compelling long-term investment opportunity in light of the recent weakness given its reinvention catalysts that will continue to bear fruit over the coming years. Continue reading "Disney - Compelling Long-Term Investment In 2019 and Beyond"

My First 100 Options Trades

I previously wrote an article walking through the anatomy of an options trade and the mechanics behind long-term successful options trading to generate high probability win rates for consistent premium income. In this article, I will provide empirical data over my first 100 options trades as a supplemental follow-up to this article above. These data are particularly noteworthy for a variety of reasons, most notably due to the market wide sell-off during this period where the Dow and S&P 500 erased all of its gains while turning negative for 2018. Furthermore, a week in December marked the worst percentage drop since the 2008 financial crisis while the Dow and S&P 500 posted their worse December since the Great Depression in 1931. This negative market backdrop provided a true test to the high probability trading and durability of this options trading method. Albeit my portfolio over this timeframe still produced a negative return these returns outperformed the S&P 500 by a wide margin (-8.8% versus -17.2%)

Options trading can mitigate risk; provide consistent income, the lower cost basis of underlying stock positions and hedge against market movements while maintaining liquidity. Risk mitigation is particularly important given the market wide sell-off throughout October-December of 2018. Maintaining liquidity via maintaining cash on hand to engage in covered put option selling is a great way to collect monthly income via premium selling. Heeding critical variables such as implied volatility, implied volatility percentile and probability, one can optimize option selling to yield a high probability win rate over the long term given enough trade occurrences. I’ll demonstrate via empirical data how these critical elements translate from theory to reality. In the end, options are a bet on where the stock won’t go, not where it will go and collecting premium income throughout the process. These empirical data demonstrate that the probabilities play out given enough occurrences over time. Despite a small sample size (100 trades) in a period where the market erased all of its gains for the year and posted the worst quarter since 1931, an 80% win rate was achieved while outperforming the broader market by a wide margin. Continue reading "My First 100 Options Trades"

Visa: The Valuation Conundrum In A Frothy Market - Part Two

I wrote a piece back in July “Visa: The Valuation Conundrum In A Frothy Market” putting forth my belief that Visa Inc. (NYSE:V) did not possess the growth characteristics to justify its valuation and its appreciation was largely a function of its Visa Europe acquisition and the overall bull market. This bull market was rewarding stocks with sky-high valuations particularly in the technology sector which has recently fallen out of favor. The recent market wide sell-off in equities during the fourth quarter has erased all gains for the broader S&P 500 index and many individual stocks. Despite this market wide sell-off, Visa has delivered great returns in 2018, appreciating 23% and currently sits at $137 per share against a 52-week high of $151. Visa faces emerging threats in the digital payments space, blockchain technology and maturing markets in the traditional payments space leading to slower growth prospects. I’ve been reluctant to get behind the stock of Visa considering its valuation, slowing growth and trends away from the traditional credit card space among the younger demographics that embrace PayPal (PYPL) and PayPal’s Venmo for payment options and exchanging payments between multiple parties. There’s also Zelle that is now powering transfers to and from bank accounts, adding to the digital evolution in the payments space. Amazon (AMZN) may be disrupting the credit card transaction space with its potential launch of Amazon financial services and Amazon Pay. I feel that shareholders have become overly enthusiastic about Visa’s growth prospects. The stock has appreciated over 20% this year, boasts a P/E of over 30 and a PEG of over 1.7 in the midst of a frothy market that has only recently sold off. This scenario doesn’t provide a great benefit-reward profile at these levels in my opinion unless the market wide pull back brings Visa more in-line with its growth profile.

Visa Fiscal Q4 Earnings and Valuation Paradox

Visa reported its fiscal Q4 earnings that beat on EPS by $0.01 (EPS of $1.21) and missed on revenue estimates by $10 million (revenue of $5.43 billion) which grew by 11.7% year-over-year. Visa also provided guidance for its fiscal 2019, “annual net revenue growth: Low double-digits on a nominal basis, with approximately one percentage point of negative foreign currency impact.”

I feel Visa’s stock price is still misaligned with its overall revenue growth prospects with an unjustified P/E and PEG ratio that remains higher than the majority of large-cap growth stocks that have a greater growth profile. Visa’s management has forecasted continued revenue growth in the low double digits with EPS growth in the mid-teens, artificially high due to share buybacks. This forward-looking revenue growth rate is a shape divergence from the post-Europe Visa acquisition revenue growth numbers. Visa’s growth rate is slowing from these artificially high post Visa numbers thus misaligned with its growth profile. Continue reading "Visa: The Valuation Conundrum In A Frothy Market - Part Two"