Playing & Trading Strategy

We got a little lucky this weekend with the performance of The Visit.  Analysts at Box Office Mojo were predicting it would do $18 mill, which was higher than the HSX estimate and those elsewhere, so I decided to keep sitting on it.  However, since the weekend derivative was already up very close to that figure come Friday morning at 12:01am when I was first allowed to trade, it made no sense at the time to drop such a large chunk of change into the .OW that looked at best to sit there stagnant and at worse to lose the investment.  I did purchase the call and short the put, so we should see some small returns from those later today when they cash out.  My customary habit is to buy the opening weekend stock as well, but normally I do this when it launches, and the fund had not yet relisted for me to do so during the initial Visit derivatives' offering.

I was also nervous, in general, about this being an M. Night Shyamalan film.  I didn't know whether audiences would stay away because of his name and his past several box office atrocities, or whether the horror audiences would show up regardless.  A lot of early reviews were somewhat positive and encouraging, stating this was a minor return to form for Night.  That also made me very cautiously optimistic.  However, I was ready to sell the stock and immediately short it come Friday night/Saturday morning depending on how the estimates changed, but the movie was performing well enough that such an about face proved to unnecessary.  In the end, we lucked out and the stock performed even better than predicted.  Still, this was one of the biggest question marks for me on the Universal horizon, and I'm glad we made out well with it (besides the loss of the .OW gains).  Considering how it could have gone, I'll take it.  I don't see anything else on the immediate horizon that could so easily go so wildly in either direction.

I also had bought max on Cop Car since it was trading well under value, and it's about to cash out next week. But it's a tiny stock, and by the end of the weekend it had tripled, putting it over value.  So I sucked up the trading fees and dumped it a week ahead of the cashout.

For everyone on board early, thanks for the vote of confidence.  UNIVX hit $200 by the time it cashed out last go-round, and we're already several weeks ahead at this point.  It took UNIVX until October 12th to bypass $12 last year, and we've already hit that in the first weekend.

We're now fully vested in Everest, The Green Inferno, and Crimson Peak.  Until the stock gets large enough for me to buy securities further in advance, I plan on concentrating on upcoming wide releases and their derivatives.  We currently have enough cash in the fund to cover the Everest derivates launching mid-week.  There are several stocks I feel may jump up early, like Krampus and Race, and I'm hoping to generate enough capital early on to be able to buy some of those stocks before that happens.  That may not ultimately be possible, but we shall see.  I've considered shorting The Visit either this week or next, because I believe its box office is front-loaded and there will be some money to be made between the 2.7x estimate and the eventual lower cashout, but I doubt it's enough to eclipse the profits to be made from upcoming wide releases.

I also plan on highlighting a few securities each week, and in light of Cop Car and The Visit now being in the rearview mirror, I'll start this week with the three I've just mentioned and that the fund is currently holding.

Everest

This one's interesting. Director Baltasar Kormakur is Icelandic and has produced mostly smaller, foreign films.  He's done several man-against-nature pics, albeit on a smaller scale; he's also made two American movies, Contraband with Mark Wahlberg, and 2 Guns with Wahlberg and Denzel Washington.  I think those films will have very little to do with this one stylistically, and I see Everest as Kormakur taking his relative recent Hollywood successes and coming back full circle to the kind of project that is most in his wheelhouse, but on a larger scale.  While this makes it difficult to predict the box office returns, he's buoyed by a large talented cast that includes Jason Clarke, Jake Gyllenhaal, John Hawkes, Sam Worthington, Keira Knightley, Robin Wright, and Josh Brolin.  That's a pretty hard cast to ignore, and those are just the more familiar faces.  I have yet to see Kormakur's earlier non-studio work, so I don't know the rhythyms of his storytelling in this kind of picture and can't predict how it will play to American audiences.  But I think there are two things very much in our favor.

The first is the cinematography, and the fact that this is getting an early IMAX release.  I think it's exactly the kind of film that will sell early IMAX tickets, both because of the incredible cinematography and the fact that there's a strong story behind it.  That means early reviews and early word-of-mouth, both of which should help to give us a very good idea of opening weekend performance before it goes wide.

The second is football season.  If Everest does have good reviews and good early word of mouth, it seems like exactly the kind of film that could be promoted heavily during the next few weekends as football season kicks off, and pull in a lot of the 20s-40s male audience.  Possibly in huge numbers.  Even though Everest is already trading pretty high, I think it could go much higher, and I believe we'll have a very good idea of that in advance of the wide release.

The Green Inferno

To be honest, I can't stand Eli Roth.  He's probably my most loathed filmmaker in all of Hollywood.  I don't like his personality, and I think he has absolutely no talent.  But I don't want to let that dissuade me from making money for the fund off of his movie.  I don't know how much money this one will make, but he does have his fans, and it's currently trading so low that it's not a hard mark to meet in wide release.  I will be watching this one as we near the date to see how the stock continues lining up with estimates.  There's no way this will blow up like The Visit did, but I think it's entirely possible for it to come off of its opening weekend with an adjusted price in the $10-20 range.

Crimson Peak

On the flip side, del Toro is one of my favorite filmmakers.  Yet, his films don't always land so well with American audiences.  Pacific Rim didn't do nearly as well here as it did in the rest of the world, and there's a reason he's still struggling to get that third Hellboy movie made.  But this film seems to be a great pairing of his big Hollywood movies with his smaller, more personal projects like Pan's Labyrinth and The Devil's Backbone.  And he has a very solid primary cast with Tom Hiddleston, Jessica Chastain, Charlie Hunnam, and Mia Wasikowski.  On top of everything else, it's an October release, there are a couple of Universal mazes that should help to cross-promote the film, and del Toro himself is a fantastic self-promoter.  He keeps describing Crimson Peak as a gothic romance, and I hope there's enough kick to it to keep mainstream American audiences from being bored with it.  Then again, del Toro keeps mentioning how kinky and perverted it is, so that should help.  I could see this one sticking around where it currently sits or a being a runaway hit; I'm not too afraid of it bombing the way I was with The Visit.  And let's be honest, no horror fan or film lover should be passing this one by; in a just world this thing will make 5x what The Visit did.  While that probably won't happen, can we shoot for 2-3x?

So there we are.  If the response is favorable and people want to read anything this long, I'll continue doing these each week.  I think we have a pretty strong line-up for the Universal Fund with Everest, Crimson Peak, and Steve Jobs over the next couple of months, and I hope you all continue to see some value in the fund.  While we don't have a new film in wide release next weekend, the Everest derivates launch this week while Everest itself begin its IMAX run, and we get a much better idea of how it will open in wide the following weekend.

If you haven't bought in yet, the stock is still trading very low, and it's a great time to jump on!