My exposure to Fifty Shades of Grey, the number one selling fiction book in America, started with the following:
1) My cousin’s bridal shower: Fifty Shades of Grey was the overriding topic of the night. The ladies were gushing about the books, telling the not-yet-inducted readers that they had to read it ASAP. Followed by several enthusiastic responses that yes, they will, it sounds great!
2) My CFA study partner, a female, asking me if I had read it. “No” “You need to, it’s amazing – I got no studying or sleeping in this week because I couldn’t put it down.”
3) Gawker ran a story on it.
There have been many more “encounters” since, so I did some digging. Here’s what I learned and why you should care – if not for the novel, but for the potential market implications.
What the Heck is Fifty Shades of Grey
Having not (yet?) read the novels I can only infer this:
The trilogy is like some erotic, soft-core fantasy that follows a sexually naive literature student who quickly finds herself in the know. Anyone with a desire to give further details can do so in the comment section below.
The three novels, Fifty Shades of Grey, Fifty Shades Darker, and Fifty Shades Freed, are currently the number one, two, and three selling fiction book in America.
Trading the Trend
Don’t underestimate the power of a female-driven phenomena. This book is going viral and women – from teens to grandmas – will spend a lot of money on their interests. But where is that money going?
First published by The Writers’ Coffee Shop Publishing House, the trilogy was picked up by Vintage Books, a division of Random House Inc.. Unfortunately, none of these are publicly traded companies. But good news! There’s a movie too…
Warner Bros., Sony, Paramount and Universal Pictures entered bids for the film rights to the trilogy. Universal and Focus Features won the bid. This isn’t much of a pure play either: Universal Pictures is a subsidiary of NBCUniversal, a joint venture of Comcast (CMCA) and General Electric (GE). Focus Features is a subsidiary of Universal Studios.
Business Section: Investing Ideas
Fifty Shades of Grey may not be your kind of bed-time novel or date night movie, but it may be your kind of investment. Although the plays on the film are diluted, they might still be there:
Universal’s movie rights were secured March 26, 2012. On that day Comcast, which has a 51% interest in Universal, saw shares close at $30.35, one cent short of its 52 week high (it has since dropped and rebounded – it currently trades around the same high level). The next day shares traded at a high of $30.41 before closing down at $30.17. Was this due to Fifty Shades if Grey?
And, of course, this will be no ordinary chick flick. Women across the country will be going out with all their friends to watch this film. Dare I say a midnight showing is in order? Movie theater stocks, listed below, might be in store to benefit from better-than-expected ticket sales.
What do you think – can the market benefit from a viral smut story?
Interactive Chart: Use the Compar-O-Matic to compare market caps for the stocks mentioned below:
1. Carmike Cinemas Inc. (CKEC, Earnings, Analysts, Financials): Operates as a motion picture exhibitors in the United States. Market cap of $171.69M. This is a risky stock that is significantly more volatile than the overall market (beta = 2.74). The stock has gained 83.61% over the last year.
2. Cinemark Holdings Inc. (CNK, Earnings, Analysts, Financials): Cinemark Holdings, Inc. and its subsidiaries engage in the motion picture exhibition business. Market cap of $2.64B. Offers a good dividend, and appears to have good liquidity to back it up–dividend yield at 3.66%, current ratio at 2.06, and quick ratio at 2.02. The stock is a short squeeze candidate, with a short float at 6.81% (equivalent to 6.07 days of average volume). The stock has gained 18.72% over the last year.
3. Reading International Inc. (RDI, Earnings, Analysts, Financials): Engages in the development, ownership, and operation of entertainment and real property assets in the United States, Australia, and New Zealand. Market cap of $113.14M. Relatively low correlation to the market (beta = 0.71), which may be appealing to risk averse investors. The stock has had a good month, gaining 11.96%.
4. Rentrak Corporation (RENT, Earnings, Analysts, Financials): Provides content measurement and analytical services to companies in the entertainment industry. Market cap of $209.07M. After a solid performance over the last year, RENT has pulled back during recent sessions. The stock is -3.45% below its SMA20 and -7.77% below its SMA50, but remains 17.09% above its SMA200. The stock has performed poorly over the last month, losing 16.43%.
5. REGAL ENTERTAINMENT GROUP (RGC, Earnings, Analysts, Financials): Operates a theatre circuit in the United States. Market cap of $2.11B. The stock is a short squeeze candidate, with a short float at 18.19% (equivalent to 11.46 days of average volume). The stock has had a couple of great days, gaining 5.5% over the last week.
6. RealD Inc. (RLD, Earnings, Analysts, Financials): RealD Inc. licenses stereoscopic three-dimensional or 3D technologies internationally. Market cap of $659.57M. The stock is a short squeeze candidate, with a short float at 13.64% (equivalent to 11.97 days of average volume). The stock has lost 59.72% over the last year.
(Written by Rebecca Lipman. Data sourced from Finviz.)
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Dig Deeper: Access Company Snapshots, Charts, Filings
- Carmike Cinemas Inc. (CKEC, Chart, Download SEC Filings)
- Cinemark Holdings Inc. (CNK, Chart, Download SEC Filings)
- Reading International Inc. (RDI, Chart, Download SEC Filings)
- Rentrak Corporation (RENT, Chart, Download SEC Filings)
- REGAL ENTERTAINMENT GROUP (RGC, Chart, Download SEC Filings)
- RealD Inc. (RLD, Chart, Download SEC Filings)
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