Crowdfunding Helps Startup Compete in Movie House Space

It’s summer time, which is usually a busy time for the movie entertainment industry as people seek out the latest releases at the movies. However, the motion picture industry has suffered, as high ticket prices coupled with movies that moviegoers find unappealing, are increasingly keeping people out of the theaters.

The large, publicly-traded movie houses have learned to go with the ebb and flow of the fickle ways of movie goers. The companies’ resilience has allowed them to continue to provide sufficient shareholder value. Competition among movie production companies remains stiff, and the houses continue to seek to roll out movies that will appeal to movie goers.

There are several much smaller companies that are not deterred by the competition and still wish to enter the space. One of those is Legion M. The startup has an atypical business structure that is based on new rules stemming from the Jumpstart Our Business Startups Act of 2012. Its success could pave the way for other smaller companies to enter the space, and they could give the larger, established movie houses a run for their money.
 

 · The Big Houses

 
Legion M will be entering a space dominated by several publicly traded companies, including Universal Pictures, which is owned by Comcast Corp. <span style="color: #6600Stock symbol00; font-weight: bold;”>(NASDAQ: CMCSA); DreamWorks Animation (NASDAQ: DSW); and Lions Gate Entertainment (NYSE: LGF).

Since March 22, DreamWorks’ stock price is up roughly 55%. That soar can largely be attributed to NBC Universal, which is owned by Comcast, acquiring it in the spring. Under the terms of the agreement, DreamWorks has an equity value of approximately $3.8 billion. DreamWorks’ stockholders will receive $41 in cash for each share of DreamWorks common stock.

The deal is expected to close by the end of the year.

By acquiring DreamWorks, NBCUniversal will have a broader reach to a host of new audiences in the highly competitive kids and family entertainment space, in both television and film It includes popular DreamWorks film franchise properties, such as Shrek, Madagascar, Kung Fu Panda and How to Train Your Dragon.

DreamWorks’s sharp stock increase was also due to the strong earnings report it delivered in May. Specifically, DreamWorks reported that first quarter 2016 revenues increased 14% to $190 million.

Lions Gate didn’t fare so well over that same period since March. Its share price fell about 5%. It had set its sights on buying Paramount Pictures from Viacom. However, the drama playing out with Viacom founder Sumner Redstone who is replacing members of the board over the company, it is unclear if Paramount will be sold.

And the much touted Lions Gate movie Batman V Superman: Dawn of Justice failed horribly this spring. From its opening date to the following Friday, box office sales fell 81%.

While Batman V Superman was not as successful as had been hoped for, Lions Gate still has the wildly successful The Hunter Games, and Twilight in its treasurer trough. Also, it has Orange is the New Black, which is streamed by Netflix.
 

 · And here comes Legion M

 
So as you can see, entering the movie production space means facing some pretty stiff competition.

However, that has not deterred Legion M. It is partnering with an alliance of Hollywood creatives to develop movies, television shows and digital content. It plans on announcing its first project later this year.

Thanks to the JOBS act, investors that had traditionally been able to fund projects and receive equity in that startup had to be accredited. There are a host of requirements to be an accredited investor, which limited the amount of funds available for many projects. Thanks to the JOBS act, many of those requirements have been loosened, and Legion M is one of the many startups to take advantage of it.

One of the benefits of the act is that it provides for equity crowdfunding. Through crowdfunding, Legion M is able to raise capital without being limited to accredited investors. The JOBS act also provides a path for startups to go public without having to jump through many hurdles. Legion M’s co-founder and CEO said that his company could “potentially” go public. However, it would assess what is best for the shareholders and how it could preserve the intimate community of investors before making a determination.

In developing its projects, the company is relying on movie fans to invest in the venture, and even go behind the scenes of the production. In return, they will own a piece of the project.

While the big motion picture houses do test their movies before focus groups, it is interesting Legion M’s approach of having those invested in the project also having a say in how they like the movie. This could allow them to receive possible valuable information about the movie before it hits the screen. This could help it avoid movies, or other projects, that flop.
 

 · In conclusion

Players like Legion M present a fresh entry into the space because it is composed of shareholders who have a say in the how movies, or other projects, are made. Also, the grassroots effort could help it keep its costs down.
The motion picture industry is sensitive to the whims of customers, which as we see with Lions Gate, can hurt their bottom lines if the film flops. On that same note, these houses can do astronomically well when their films are hits. I expect to see more mergers and acquisitions in the space as companies, like Viacom, seek to concentrate on their stronger brands.

How To Become A Better Day Trader

One of the questions that you often see when you “Google” anything about day trading is “how do I become a day trader?”

However, a better question is “how do I become a better day trader?”

I asked experts and novices, as well as researched the plethora of websites on the subject, to narrow down some of the best advice on becoming a better day trader. The goal is not to dump a lot of useless information on you about how rich you can become by simply sitting in front of your computer and buying and selling stocks all day.

Quite contrary, as that is the very misunderstood part of day trading. True, there are plenty of instances where people have eked out fortunes from day trading. Was it luck? Was it persistence? Was it their gift of fortune telling?!

I think none of the above. Instead, I think a large part of their success stemmed from their daily approaches to their trading and their keen awareness that taking profits through day trading begins long before you turn on your computer and monitors.

It’s not just about sitting at a computer all day and making trades; that’s the habit of those who are just trading, and sadly, sometimes trading ignorantly. Becoming a better day trader means employing not just strategy, but discipline. Here are some of the most pressing things that I found that may help you strike it rich as a day trader, or at least stay afloat!
 

 · What the better day trader’s plan entails

 
By far, one of the things that separates the day trader from the better day trader hinges on the daily plan. It’s important to understand the importance of having a daily plan at hand to use as a guide in making your trades.

The first piece of your plan identifies the kinds of stocks you want to trade. The plan then lists the best entry points. You’ll include your target price based on the strategy of your choice. Are you comfortable selling the stock as soon as it starts making you money? Then scalping may be the way to go for you.

Does the news that Apple sold fewer iPhones than analysts expected, make you want to run for the hills and sell or avoid buying its stock? Then you may be a momentum trader who prefers trading on news. Whatever your strategy, being a better trader means having it in your daily plan.
 

 · Don’t just develop a plan each day; Stick to it

 
The only thing that trumps having a daily plan is sticking to it. That may sound so simple, but when the day gets going, and your trades aren’t going your way and you’re eyeing another stock that’s riding higher…you may want to veer off course. Don’t. The better day trader knows better.

There comes a time (or several times) in every day trader’s life when they consider throwing caution to the wind due to their “guts” telling them to abandon their plan and chase a stock. This seems to be especially the case if that stock is moving higher at a quick pace. Becoming a better trader means recognizing that while it seems everyone is jumping on this stock’s bandwagon, it’s likely not the ride for you.

As noted at Bankrate.com, “experienced traders are going out the back door while new traders are coming in. If you miss a stock on the way up or down, let it go. There will be other trading opportunities.”
 

 · Know when to cut your losses

 
Another issue that conflicts day traders, especially novices, relates to trying to figure out when to cut their losses.

“Statistics tell us that most new day traders lose more than $21,000 dollars in their first three months of trading. If they use leverage, the average loss rises to more than $45,000,” according to CRB Trader.

Nothing supports the reasoning for not overtrading and cutting a loss more than an understanding of the mathematics of what it takes to recover from a previous losing trade.

When it comes to knowing when to cut your losses goes back to your daily plan.
 

 · Know the regulatory rules

 
Part of being a better day trader is being fully up to speed on the regulations surrounding the industry. While it may be easy to fall into the train of thought that you’re operating within the confines of federal regulatory bodies when you make your trades, there are some key things that can spell disaster.

One area that seems to slip traders up a lot relates to margins. Clearly you know that’s borrowed money and they can spell disaster for you if that trade goes the wrong way. The better trader understands this, as well as the rules surrounding how much the can “borrow.”

A rule in particular relates to pattern day traders. The Financial Industry Regulatory Authority, or FINRA, issued investor guidance to provide some basic information about day trading margin requirements and to respond to frequently asked questions. The better trader familiarizes themselves with such regulations.
 

 · Network

 
Meeting others who day trade to share their thoughts and ideas could also be helpful. Not only may others be able to give you some strategies that you may not have considered, but getting away from those monitors and breaking up the monotony of your day will be stress relieving.
 

 · In conclusion

 
You can have the best of all the technology in the world; you could have talked to dozens of top notch traders; you could have read up on the subject until you are blue in the face. All of this will be fruitless, if you sit in front of your computer, and let your emotions lead you away from your plan.

Bank Stress Test: $385 Billion in Losses Wouldn’t Cause Financial Collapse

Let’s say there was a severe global recession in which the unemployment rate soared five percentage points, and there was a heightened period of financial stress, and negative yields for short-term U.S. Treasury securities. Could the big banks survive?

Yes.

So says the Federal Reserve, which drew the conclusion for this most severe hypothetical scenario based on the 2016 bank stress test. It noted that this “severely adverse” scenario projected that loan losses at the 33 participating bank holding companies would total $385 billion during the nine quarters tested.

The biggest banks by market cap include Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Goldman Sachs (NYSE: GS), JPMorgan Chase (NYSE: JPM) and Morgan Stanley (NYSE: MS).

All of these banks, and 28 others, received word from the Federal Reserve on Thursday that they had passed the so-called bank stress test. This is the sixth round of stress tests led by the Federal Reserve since 2009 and the fourth round required by the Dodd-Frank Act. The firms tested represent more than 80 percent of domestic banking assets. The Federal Reserve uses its own independent projections of losses and incomes for each firm.

Since 2013, banks have begrudgingly complied with a wide array of regulations stemming from the Dodd-Frank Act calling for banks to take and pass these tests. As part of the stress tests, banks have been required to submit paper work to the Federal Reserve to prove they are financially healthy enough, especially when it comes to capital, to weather a fiasco similar to the one that caused the financial collapse in 2008.

The stress test results are meant to provide the Federal Reserve with forward-looking information to help them supervise banks and assess their risk profiles. They want to make sure that institutions have robust, forward-looking capital planning processes that account for their unique risks. We learned the hard way after 2008 that many banks did not have sufficient capital to continue operations throughout times of economic and financial stress.

The stress tests put under the microscope banks’ economic variables, including macroeconomic activity, unemployment, exchange rates, prices, incomes and interest rates.

Passing the stress test is crucial in helping banks to be able to increase their dividends and buyback shares. You may recall last year when Goldman Sachs, JPMorgan Chase and Morgan Stanley came pretty close to failing the test. The Fed ordered them to resubmit their capital plans by either decreasing the amount of their dividends or by decreasing the size of their buyback programs. They did so and passed. Interesting, it was the second year in a row that Goldman was asked to resubmit its plan.

Because the banks passed the test under the worst scenarios, pundits are raising questions about whether the stringent compliance requirements are still needed. Most agree, however, that they are still needed considering they provide not only federal oversight, but they also force banks to be critical in making sure their internal financial controls will pass muster.

As noted above, passing the stress tests is crucial to banks being able to increase the size of the share buyback programs, and increase their dividends.

However, I think it would be better for them to increase their. I heard one observer say it best by asking, “when was the last time you heard of a company doubling its share price through buyback programs?” Companies are far more valuable when they increase their dividends instead.

If you are considering the banking sector as an investment, there are some things to keep in mind. Most importantly, remember that banks’ credit quality is getting weaker. However, it’s not weak enough yet to be a deal breaker.

Banks are seen as relatively cheap too, with some of them selling at a 40% discount to book value.

Also expect to see more consolidation and acquisition to be the wave of the future among the smaller banks.

In the meantime, the market is readying for the rest of the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR). Those results will be released on Wednesday, June 29.

Through 600-point Sell Off, Verizon Falls Just .44%

We saw most of the stock market sell off on Friday following the U.K.’s historic exit from the European Union. However, there were some stocks that managed to hold their own with one of those being Verizon (NYSE: VZ).

One of the reasons the company was able to stay in the green could be attributed to a key acquisition it made last week.

I consider Verizon to be a mixed bag of tricks. It’s fresh off of a strike that lasted almost two months, which is expected to have negatively affected its second quarter earnings. It reports those earnings next month.

Last week, it announced the acquisition of a company that develops location-based software to manage mobile resources.

While Verizon weathered the Friday’s deep declines, at this point, I would steer clear in buying Verizon as a long-term play. However, there is a good amount of interests in the options market for calls and puts that expire just before it reports earnings next month, and they may be the way to go as investment plays.

While most stocks opened down, Verizon opened at $54.31 and moved up to $55.22 before pulling back. It closed Friday down .40%. The stock is up just over 18% year-to-date.
 

 · IoT investment

 
Verizon acquired a company that develops location-based software to manage mobile resources. Called Telogis, the company sells software-as-a-service (SaaS), which incorporate location information into applications for vehicles, as well as geospatial software development toolkits.

Verizon is specifically seeking to position itself in the connected vehicle and mobile enterprise management sectors. In addition to Telogis’ enterprise product portfolio, Verizon was attracted to the software company because of its partnerships with some of the world’s leading vehicle and equipment manufacturers.

Telogis brings its software platform and new distribution relationships to Verizon
Telematics’ suite of connected vehicle solutions for consumers and enterprise customers.
 

 · Strike of the year

 
Verizon’s wireline employees went on strike beginning on April 13. It lasted through June 1, and during that time the company experienced all kinds of problems.

The sheer magnitude, in terms of the numbers of workers who walked off the job and left the company’s Fios unit unmanned, will have a long-term effect of the company. While the company was able to maintain the Fios unit while it negotiated new contracts with the workers, there is still concern over when the company will fully rebound from the strike.

Referred to as the wireline workers, roughly 40,000 of them went on strike, including network technicians and customer service representatives. Fios consists of Internet, telephone and television services.

As a result of the strike, Verizon had to incur several additional costs. For example, it had to shift costs that had been associated with acquiring new customers and new installations to keep existing customers who needed regular maintenance and repairs. It also saw its costs increase related to hiring contractors to replace the striking workers; and it had to pay overtime to management employees.

Verizon’s CFO Fran Shammo has said that earnings per share during the second quarter were expected to be lessened by between $.05 and $.07. As of June 16, its EPS was $.96. Shammo added that the company’s earnings “will flow to the end of the year.”

Shammo recently spoke at a conference hosted by Bank of America Merrill Lynch. He opened up to the group and also spoke about how the strike, which was the first time he had done so since the end of the strike. He admitted that he was unable to pinpoint the numbers, such as how many installations it has in the works.
 

 · Call and put activity

 
Verizon is due to release its second quarter earnings report on July 26. There was a considerable amount of interest on Friday for the call and put contracts that expire on July 15.

The contracts with the most open interest were as follows:
The 52.50 call had an open interest of roughly 44,000
The 55 call had an open interest of roughly 29,000
The 45 put had an open interest of roughly 66,000
The 50 put had an open interest of roughly 55,000

Positive Housing Data; Guidance Make Sector a Long-term Play

Recent housing-related figures from a wide range of players in the space indicate the economy is continuing to recover. The positive data can be used as a basis for those who may have avoided the space as a long-term investment play.

Housing-related data came from many sources this week. On Thursday, the Commerce Department released new home sales. On Wednesday, the National Association of Realtors released numbers for existing home sales for May. Home Depot (NYSE: HD) received an upgrade by an analyst who noted that a slowdown in the growth of home prices doesn’t present as much risk anymore. Lastly, KB Home (NYSE: KBH) and Lennar (NYSE: LEN) reported strong earnings this week.
 

 · Commerce Department numbers

 
In May, new home, single family home sales dropped 6% to a seasonally adjusted annual rate of 551,000 units, according to the Commerce Department. Also, April’s sales pace was revised down to 586,000 units, still the highest since February 2008, from the previously reported 619,000 units.

Although they make up just a tenth of all home purchases, they are important nonetheless. Just consider all of the other areas that are affected. Home building generates substantial economic local activity, including new income and jobs for residents, and additional revenue for local governments, notes the National Association of Home Builders.
 

 · National Association of Realtors

 
Realtors especially benefit from upticks in the housing industry. The group that represents them, the National Association of Realtors, reported that existing-home sales sprang ahead in May to their highest pace in almost a decade, while the uptick in demand this spring amidst lagging supply levels pushed the median sales price to an all-time high. Also, all major regions except for the Midwest, saw strong sales increases last month.

The group reported that total existing home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, grew 1.8% to a seasonally adjusted annual rate of 5.53 million in May from a downwardly revised 5.43 million in April. With last month’s gain, sales are now up 4.5% from May 2015, when they were 5.29 million. Sales are at their highest annual pace since February 2007, when sales totaled 5.79 million. As you recall, that was right before the 2008 housing industry collapse.
 

 · Home Depot strengths

 
Home Depot got a boost this week, partly due the strengthening of the housing market. Nomura Securities upgraded the company to “buy” from “neutral.” Analyst Jessica Schoen Mace said:

“The biggest change in our position from our former thesis is the previous notion that slowing home price growth posed a great risk to Home Depot’s comp. After the [year over year] increase in home price growth slowed to 4.4% and 5.6% in 2014 and 2015 from 13.5% in 2013, Home Depot’s comps were still solidly positive, including a high-single-digit increase in the U.S. in 2015.”

Nomura still expects home prices to decelerate, which is an assumption also held by Home Depot. However, any positive growth would be a tailwind. It is one of several factors that affect the contribution from housing to HD’s sales opportunity, including housing formation, turnover, and aging housing stock, Schoen Mace said.
 

 · Housing builders enjoyed strong first quarter

 
KB Homes’ shares climbed this week, partly due to it reporting second quarter earnings that beat estimates. It reported earnings per share of $.17 versus analysts’ estimates of $.14. Revenue was up 30% to $811 million for the quarter.

In reporting earnings, the company’s CEO Jeffrey Mezger said its officials were encouraged by the continued improvement in housing market conditions across the country. Also encouraging is the recent increase in participation from first-time homebuyers, which have historically been KB Homes’ primary customer segment.

The company believes it is well-positioned to leverage its strength in serving the demand from first-time homebuyers with dynamic product offerings. With favorable market trends and progressive financials and operations in the first half of the year, the company believes it has positive momentum for the rest of the year.
Lenner homes, the second-largest homebuilder behind D.H. Horton, also beat analysts’ estimates when it reported second quarter earnings this week. Its EPS came in at $.95 versus analysts’ estimates of $.86. Revenue was up 15% to $2.7 billion.

The company noted a somewhat interesting happening that stifled growth in one city in particular. It said that its decision called “Homebuilding Houston and Homebuilding Other” experienced a decrease in home deliveries in Houston, which was primarily due to less demand driven by volatility in the energy sector.

Federal Reserve Chair Janet Yellen delivered her semi-annual notes to Congress this week, and said housing has continued to recover gradually, aided by income gains and the very low level of mortgage rates.

All of these factors contribute to the rational that there are several long-term investment opportunities for the housing sector right now.