Investing in Spiderman: Again, I told you so!
By Ian Cooper
We mentioned this trade on Smart Investing Stock Busters with Sandy Franks. We mentioned this in the TFN e-News Alert. We’ve even mentioned it a few times in Death Cross Trader.
Many of you listened. Others… well, I told you so.
The third installment of Spiderman banked a cool $148 million. Okay.
Q1 profit more than doubled thanks to Spiderman returns. Great.
But buying Marvel isn’t part of a smart long-term investment strategy. It’s all about the near-term perceived success of films like Spiderman. The stock runs up ahead of a release, and pulls back shortly after the release.
In 2002, after running from $2.50 to more than $6, the stock sold after shortly after the first film’s release, falling from about $6 to $3.50. Then, on the June 30, 2004 release of Spiderman 2, the stock tanked from about $20 to less than $13.
And just as we stated in April 17, 2007’s TFN e-News Alert, “We could see the same situation unfold following the 15% jump from about $26 to $30 in recent weeks.” And lo and behold, the stock is pulling back.
Is it an unexplainable phenomenon wreaking havoc on unsuspecting investors? Nah, investors, too, are well aware of the coming doom after this product’s release and opt to short the hype-driven stock for quick gains on the downside. The stock, it seems, already priced in hype surrounding Spiderman 3.
Another downside catalyst for Marvel: The stock is trading at 43 times earnings, and seven times sales. This one’s overvalued, and ready to pull back.
The best part is we come across trading patterns such as this every day.
Ian L. Cooper
Death Cross Trader
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