Avatar is an awesome film that looks great and, I think, is best seen in IMAX 3D. Now with a worldwide gross box office of $285 million as of December 22 according to LA Times report, are there some money to be made in buying IMAX stocks since Avatar IMAX 3D tickets seem to be the first ones to be sold out first?
Well, to make any informed investment decision, one should study the financial reports of a company and get to know about the industry first. In the case of IMAX, you can find many of the financial reports in the investor relations area.
One area that may send off additional signal is the insider trading activities of a company, that is whether the senior executives of a company are buying or selling stocks. Here is an insightful excerpt from September 2009 CNN Money article “Insiders sell like there’s no tomorrow” (emphasis added),
But against that improving backdrop, one indicator has turned distinctly bearish: Corporate officers and directors have been selling shares at a pace last seen just before the onset of the subprime malaise two years ago.
While a wave of insider selling doesn’t necessarily foretell a stock market downturn, it suggests that those with the first read on business trends don’t believe current stock prices are justified by economic fundamentals.
“It’s not a very complicated story,” said Charles Biderman, who runs market research firm Trim Tabs. “Insiders know better than you and me. If prices are too high, they sell.“
According to the IMAX’s insider trading records, you can find from Nov 23rd to Dec 22nd, 2009, there have been a number of insiders’ transactions. If you read the details, you will find almost all insiders have been selling IMAX shares including co-CEOs of IMAX, Mr. Richard L. Gelfond and Mr. Bradley J Wechsler. It is worth noting that Messrs. Gelfond and Wechsler have adopted “stock appreciation rights automatic exercise plans” on November 16, 2009 (rule 10b5-1 trading plans) so Mr. Gelfond can sell up to 720,000 shares in equal monthly installments over a 12-month period, and Mr. Wechsler can sell up to 900,000 shares, in equal monthly installments over a 10-month period. To be fair, if the combined 1.62 million shares were to be sold throughout the duration of the plans, Mssrs. Gelfond and Wechsler would “continue to own approximately 65% of their combined share ownership in the Company” as stated in the press release.
IMAX stock price has increased substantially in three months (US$9.00/Sept 23rd, 2009) and one month ($10.48/Nov 20th, 2009) to yesterday’s close of $12.79, which amount to increases of 42.1% in three months and 22% in one month respectively.
Many moviegoers, including this reporter, have been rightfully impressed by Avatar IMAX 3D and see tremendous potentials in IMAX 3D. Therefore it is not surprising to see people wishing to invest in IMAX as we can see from recent IMAX stock trading volumes,
- 1.93 million shares on Dec 11th, 2009, a day after the Dec 10th London premiere
- 1.29 million shares on Dec 18th, world premiere
- 1.08m on Dec 21st
- 1.62m on Dec 22nd
The above volumes are high when comparing to the average trading volume of 586,000 shares and the recent low of 58,387 shares on Nov 27, 2009 (data from Google Finance).
If you aspire to be a long term value investor like Warren Buffett, it is prudent to understand the industry and analyze a company’s financial reports first before making any investment decisions. For IMAX’s financial reports, you can find them in IMAX’s investor relations area. The annual reports and the “Management’s Discussion and Analysis” sections are good place to start reading.
(note: This article is cross-posted in examiner.com)