A special report by Colin Cieszynski, CFA, CMT, Chief Market Strategist, CMC Markets It’s long been thought in the movie industry that wins at the big winter awards shows like the Golden Globes or BAFTAs can help to boost box office and DVD revenues for winning films. Ahead of the biggest film awards ceremony of the year, the Academy Awards, Colin Cieszynski takes a look at whether an Oscar win has any impact on the share prices of movie studios. Within the report Colin discusses: • Which movie studio will traders swoon for at this year’s Oscars • The history of movie studios stock performance off the back of award wins • How movie season peaks in the market in relation to the Movies and Entertainment Sector Who Might Traders be cheering for at this year’s Oscars? Despite last year’s debacle, Fox has still delivered a positive return on average, but the top performer among the big studios has been Warner. The market has also responded well to others (Weinstein, Dreamworks, Lions Gate) winning the top award. March Winning Sector Studio Return (Since 1990) Warner 1.02% MGM (2.46%) Universal (1.76%) Paramount (0.27%) Disney (1.56%) Fox 4.84% Others 3.20% Source: CMC Markets, Wikipedia Overall, this year’s slate of nominees favours market bulls (Warner, Fox, Weinstein, IFC), while bears may find themselves rooting for Paramount and Universal. Sony has not taken the big prize in the last 25 years, so it’s unknown how the market would react to them. Last Year’s Winner follow up and this year’s nominees 21st Century Fox was unable to capitalize on last year’s Oscar win unlike Warner the year before. Fox had performed much better after its previous Oscar win in 2009 when it had put up nearly a 20% gain. In 2014, Fox lost 4.6% in March underperforming the overall sector. March Return Winner Winning Vs Year Studio Sector Studio Sector 2000 Dramwrks13.60% 2001 Univrsal(9.27%) (3.24%) 6.03% 2002 Univrsal(0.71%) (3.71%) (3.00%) 2003 Disney (2.17%) (0.24%) 1.93% 2004 Warner (1.77%) (2.25%) (0.47%) 2005 Warner 1.56% 1.86% 0.30% 2006 Lions Gt(1.31%) 12.40% 13.72% 2007 Warner 0.29% (3.05%) (3.34%) 2008 Disney (3.73%) (3.18%) 0.55% 2009 Fox 12.07% 19.18% 7.12% 2010 Univrsal10.49% 14.54% 4.05% 2011 Wnstein (1.29%) 2012 Wnstein 1.82% 2013 Warner 5.61% 8.47% 2.86% 2014 Fox (2.38%) (4.68%) (2.30%) Average 0.65% 1.53% 1.46% Source: CMC Markets, Bloomberg L.P. This year, Fox could get another kick at the can with two of this year’s eight Best Picture nominees. Warner, Paramount, Universal and Sony are also in the running with one nominee each. This Year's Best Picture Nominees Film Associated Studio American Sniper Warner Birdman Fox Boyhood IFC Grand Budapest Hotel Fox Imitation Game Weinstein Selma Paramount Theory of Everything Universal Whiplash Sony Source: Wikipedia.org Seasonality in the Stock Market and the Movies and Entertainment Sector Stock markets over the long-term have tended to perform better or worse at different times of the year. Over the last quarter-century, on average, the Dow has started out slow, rallied in March through May, having a correction between June and mid-October (except for a July bounce), and then finishing the year strong. The movie business also has its peak periods at different times of the year with the summer blockbuster season running from May through August and the holiday blockbuster season running from November through January. The sector also tends to attract a lot of media attention in January and February during awards season. Results show that movie related stocks have on average tended to start out the year very strong on awards related buzz, outperforming the Dow in January and February. March, however has seen a bit of a letdown for the sector after the awards season wraps up, showing a brief post-Oscar flop. Returns have historically ramped up again ahead of the summer blockbuster season. Interestingly the biggest time of the year for the movie box office, has historically been the worst time of the year for movie stocks which even manage to underperform in a soft stretch for the broader market. This summer swoon could be due a combination of factors, including stocks rallying on anticipation of big summer releases then seeing profit taking once the tent poles are out, selloffs on concerns over the impact summer flops could have on earnings and traders looking ahead to the traditionally slower fall season. Movie stocks have then historically tended to outperform in an October rebound ahead of the holiday releases and perform pretty much in line with overall market performance to finish the year. Average Return 25 years Dow S&P Sector Sector Versus Index Dow Jan (0.11%) 1.33% 1.45% Feb 0.25% 2.27% 2.02% March 1.32% 0.38% (0.94%) April 2.43% 2.61% 0.18% May 0.97% 1.79% 0.82% June (0.91%) (2.01%) (1.10%) July 1.55% (1.11%) (2.65%) August (0.96%) (1.88%) (0.92%) Sept (0.82%)(0.94%) (0.12%) Oct 1.42% 2.73% 1.31% Nov 1.82% 2.26% 0.44% Dec 1.76% 1.89% 0.13% Source: CMC Markets, Bloomberg L.P. How have individual studios performed relative to the sector historically around awards season? Although the overall sector has historically underperformed the market in March, individual studios have acted differently and some of them do appear to experience a post-Oscar pop. Average Return 25 years Time 21st Viacom Sony US Comcast Lions MGM Imax Warner Disney Century (Parmnt)(Clmba) (Unvrsl)Gate Holdings Fox January 0.47% 4.33% (0.03%) (2.61%) 2.56% 0.76% 3.66% 5.53% 5.83% Feb 3.04% 3.92% 2.26% 1.53% 1.81% 0.30% 4.34% 0.82% 4.46% March 5.07% (0.15%) 1.36% 4.07% 1.56% (0.44%) 4.36% 3.89% 6.24% April 3.73% 2.76% 3.10% 2.81% (0.84%) 0.84% (4.09%) 1.97% 2.87% May 1.06% 2.31% 1.71% 1.34% 0.81% 2.83% 2.33% 15.94% 7.87% June 0.38% (2.79%) 1.23% (2.98%) (1.09%) 1.00% 0.83% (1.77%) (1.61%) July 0.74% (0.49%) (2.53%) (1.58%) 0.41% (0.30%) 2.26% (2.16%) (0.88%) August 1.37% (2.40%) (0.06%) 3.20% (2.47%) 0.18% 3.52% 2.12% (5.73%) Sept 3.44% (1.66%) (0.03%) (0.01%) (2.06%) 2.12% 2.92% 9.33% 1.54% Oct 3.97% 3.47% 1.41% 0.02% (0.33%) 2.18% 1.61% 0.39% 4.15% Nov 5.54% 3.68% 1.35% (1.64%) 0.32% 1.76% (1.52%) 3.37% 2.87% Dec 7.64% 0.70% 3.70% 5.21% 5.42% 4.70% 1.17% 7.36% 3.79% Source: CMC Markets, Bloomberg L.P. It’s important to note that some of the studios are buried in larger conglomerates with the film business return mixed in with broadcasting, cable, consumer electronics and other operations. Performance between January and March has varied between studios. The first three months of the year have been consistently strong (1%+ gains) for Imax, Lions Gate and Sony. Time Warner, Fox and Paramount have historically started off soft in January then really picked up in February and March. Disney and MGM have been uneven through the quarter with the House of Mouse soft in March and the lion tamed in February. Comcast has shown the weakest performance of the group historically over the winter months. Heading into the spring, some of the companies that have historically outperformed in March then retreated in April on average like Lions Gate while some of the weaker March performers have then rebounded into April and May, particularly Disney. A summer selloff then has historically started for most Studios in June and continuing through July and even longer in several cases. By September after the Toronto International Film Festival kicks off the run into the holiday season, many of the studios have started another advance that has carried through the end of the year and into award season once again.