This Summer Trend Could Make a Comeback

While the world is always changing, there are many cyclical trends that play out while that happens. Commodities move on a long cycle, but tend to have years of a bullish uptrends before years of pulling back.

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  • It’s common for stocks to rise at the start of the year, then pull back a bit over the summer. This summer, one market sector that hasn’t gotten much interest is starting to go back to its historical trend.

    That trend is the movie theater business. Box office numbers are trending up again. While not back to their 2019 peak, the strength at the box office could continue to benefit movie companies.

    Among the movie-related stocks, media companies are still out of favor with the markets. But theater chains, such as Cinemark (CNK), could be a big winner over the coming months.

    Shares are already up 34% over the past year, beating the overall market. But they’re also still cheap, at 14 times earnings. That suggests a momentum play higher from here.

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  • Action to take: Speculative buyers may like Cinemark shares here. Shares don’t pay a dividend, but could deliver low-double-digit returns over the coming months.

    For traders, the September $22 calls, last trading for about $1.55, could see mid-double-digit returns if box office trends continue to bode well over the summer blockbuster season.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.

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