Oscars Trading Preview: Studios brace themselves to beat the March Oscar curse
by Colin Cieszynski, CFA, CMT, CFTe, Chief Market Strategist, CMC Markets
Ahead of the Oscar ceremony on 28th February, Colin Ciesznyski looks at whether a big win on Oscar night can translate into stock market gains.
Within this special report Colin Cieszynski focuses on:
• Disappointing stock market returns for previous Oscar wins and nominations
• This year’s Best Picture Nominees and studio returns in previous years following a win
• Whether Fox can convert a win into gains for its stock and break its recent losing streak
It’s received wisdom that Oscar wins can boost box office returns for winning and even nominated films. However, our analysis shows otherwise. When looking into the results of which studio won Best Picture, over the last 25 years, it doesn’t necessarily translate into gains for the stocks of winning studios and there is often a letdown for Oscar winning studio stocks.
March is usually a strong month seasonally for stock markets. In 18 of the last 26 years, the Dow Jones Industrial Average has gone up in March, rising 1.1% on average. In contrast, in 11 of 17 years, the stock of the studio that won the Best Picture award fell in March.
Longer term, however, results for Oscar winners have been more positive. Looking at market performance between the January before and the January after an Oscar ceremony, the Dow has gone up 20 of 26 years with an average return of 8.6%. Oscar winning studios have gone up over the following year 9 of 17 times with an average gain of 15.2%. The last two years, however, Fox has dramatically underperformed the market, falling 18.6% over the last year way more than the Dow’s 4.0% loss, while after its 2014 win, its stock rose only 4.2% way short of the Dow’s 9.3% gain.
2016 Oscar Best Picture Nominees
This year, there are eight nominees for best picture. 21st Century Fox, who won the last two years would appear to have the best chance of winning with three nominees. In the last twenty five years, a studio has won two Best Picture prizes in a row five times, none have won three in a row.
Fox’s prospects and prior performance have been discussed above. Of the three remaining studios in the running, Warner, Paramount and Disney, Warner is the only one who has posted a positive return on average in the March following a Best Picture win, both Warner and Disney have posted gains in the year following a win.
There are two independent studios nominated this year. Wins by smaller and independent studios have had mixed results in the past. Stocks did really well in the two years The Weinstein Company won, but declined in the March following wins by Lions Gate, Paramount and DreamWorks SKG.
To conclude, one of the big stories underlying this year’s Best Picture Award, is whether Fox can win for a third year in a row. If so, can it convert the win into gains for its stock and break its recent losing streak? It also will be interesting to see if one of the independent studios can break through for a win.
I’ve seen several films this year, but those have mainly been nominated in the technical categories. I read The Martian, which was an excellent book, and as a fan of Ridley Scott films in general, I’ll be rooting for it to bring home the big prize. Many traders, however, may elect to cheer for The Big Short or one of the other candidates.