Trading vs. Investing: Flavor Of The Week Industries

Trading vs. Investing: Flavor Of The Week Industries

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If you’re an active trader, you may consider your time spent researching firms a part time job. There are, after all, companies that require a more watchful eye than others, and woe to the investor who misses a game-changing headline.

Certain industries are more likely to fall into this category than others. They are typically the ones that rely on flavor-of-the week, short-term trends for profit.

Some examples should suffice:

Pharmaceutical companies: FDA approval can make or break a company. Share prices can drop as much as 50% if a trial drug is rejected.

Film companies: They are reliant on blockbuster hits. Movies like Harry Potter and The Hunger Games have been instrumental in bringing up the value movie producer Warner Brothers Time Warner (TWX) and Lions Gate Entertainment (LGF), respectively. Similarly, Disney’s (DIS) blockbuster hit The Avengers helped restore the stock’s value (and then some) after its John Carter flop.

Toys and Gaming: Toy and game companies like Zynga, Inc. (ZNGA) need to consistently release hit games for their stock to perform well. The industry is wrought with competition, and buying out competitors (like the OMGPOP acquisition) is not always a sensible option.

Trading vs. Investing

The industries mentioned above are exemplary of companies more appropriate for trading than for investing. They wouldn’t be ideal for buy-and-hold investors, and they are not for the faint of heart.

Our very own David Neubert (davidneubert.com), an active trader, admits he doesn’t like game, movie, and airline companies as long-term investments because they are usually only “as big as their last success”.

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In summation: The volatility and sudden moves of those stocks do offer some great short-term trading opportunities, but only for those that are constantly connected and in-tune with the markets and news surrounding those companies. The stock’s reliance on their one-hit success is not a sustainable business model.

Of course, if you like making speculative short-term trades, these kinds of companies can provide great opportunities.

With that in mind we created a list of game, movie, and airline stocks that have a wide 52-week range, which is the difference between the 52-week high and 52-week low.

To demonstrate the % change we calculated the (52wk high- 52wk low)/52 wk low. This represents the upside potential from the 52 week-low, bounded by the 52 week high. If you had theoretically bought at the 52 week low and sold at the 52 week high, this would be your holding period return (not including any dividends)

Do you have what it takes to follow these companies? List sorted by range percentage.

Interactive Chart: Use the Compar-O-Matic to compare market caps for the stocks mentioned below. Note the rapid changes:

“1. RealD Inc. (RLD, Earnings, Analysts, Financials): Licenses stereoscopic three-dimensional or 3D technologies internationally. Market cap at $611.68M, most recent closing price at $10.97. The stocks 52-week high is $35.61 and the 52-week low is $7.85, a range that is 353.58% of the 52-week low.

 

“2. LeapFrog Enterprises Inc. (LF, Earnings, Analysts, Financials): Provides technology-based learning platforms worldwide. Market cap at $656.71M, most recent closing price at $9.63. The stocks 52-week high is $10.78 and the 52-week low is $2.57, a range that is 319.46% of the 52-week low.

 

“3. US Airways Group, Inc. (LCC, Earnings, Analysts, Financials): Provides air transportation for passengers and cargo. Market cap at $1.74B, most recent closing price at $10.06. The stocks 52-week high is $11.73 and the 52-week low is $3.96, a range that is 196.22% of the 52-week low.

 

“4. GOL Linhas A (GOL, Earnings, Analysts, Financials): Operates as a low-cost low-fare airline in Latin America. Market cap at $1.31B, most recent closing price at $4.85. The stocks 52-week high is $13.47 and the 52-week low is $4.62, a range that is 191.53% of the 52-week low.

 

“5. Lions Gate Entertainment Corp. (LGF, Earnings, Analysts, Financials): Engages in the motion picture production and distribution, television programming and syndication, home entertainment, family entertainment, new channel platforms, and digital distribution activities. Market cap at $1.58B, most recent closing price at $12.22. The stocks 52-week high is $16.19 and the 52-week low is $5.76, a range that is 181.08% of the 52-week low.

 

“6. Spirit Airlines, Inc. (SAVE, Earnings, Analysts, Financials): Provides passenger airline service primarily to leisure travelers and travelers visiting friends and relatives. Market cap at $1.51B, most recent closing price at $20.16. The stocks 52-week high is $24.75 and the 52-week low is $10.18, a range that is 143.13% of the 52-week low.

 

“7. SkyWest Inc. (SKYW, Earnings, Analysts, Financials): Operates as a regional airline in the United States. Market cap at $394.31M, most recent closing price at $7.87. The stocks 52-week high is $15.59 and the 52-week low is $7.79, a range that is 100.12% of the 52-week low.

 

“8. China Eastern Airlines Corp. Ltd. (CEA, Earnings, Analysts, Financials): Operates in civil aviation industry. Market cap at $3.44B, most recent closing price at $14.95. The stocks 52-week high is $25.92 and the 52-week low is $13.25, a range that is 95.63% of the 52-week low.

 

“9. JetBlue Airways Corporation (JBLU, Earnings, Analysts, Financials): Provides passenger air transportation services in the United States. Market cap at $1.18B, most recent closing price at $4.15. The stocks 52-week high is $6.36 and the 52-week low is $3.40, a range that is 87.07% of the 52-week low.

 

“10. TAM S.A. (TAM, Earnings, Analysts, Financials): Provides passenger and cargo air transportation services in Brazil and internationally. Market cap at $3.26B, most recent closing price at $20.81. The stocks 52-week high is $25.56 and the 52-week low is $13.85, a range that is 84.55% of the 52-week low.

 

 

(Written by Danny Guttridge)

 

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One Response to “Trading vs. Investing: Flavor Of The Week Industries”

  1. Thanks for the shout out. Basically, investing in anything glamorous is usually a bad idea. (See Facebook IPO)

    Disclosure: I have been trading around FB a bit.

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