As the Toronto International Film Festival (TIFF) gets into full swing, Colin Cieszynski analyses film stocks and looks ahead to London Film Festival and Christmas season. Within the report Colin discusses: • The performance of film stocks in the lead up to TIFF • How each movie company has performed against their peers • The expectations of film stocks in the lead up to London Film Festival, the Christmas box office and awards season It seems like a lot longer but it’s only been a month since media stocks sold off following a round of disappointing earnings. Since then, the focus of traders has shifted away from stocks and sectors following the end of earnings season to broader drivers, such as China’s market crisis and interest rate speculation. To no surprise, media stocks have continued to decline over the last several weeks, but performance among the stocks in the group has changed significantly, as shown in the table below: During the first week of August, Disney, Time Warner and Viacom were all hit hard while CBS and particularly Netflix were able to avoid the earnings storm. The broad market storm, however, has sunk all boats and reduced the gaps with CBS and Netflix getting hit harder after August 6th. Netflix had dropped particularly severely into the August 24th low but then bounced back strongly. This action goes to show that in times of market crisis all stocks tend to get hit regardless of fundamental performance or valuation. To put it another way, when the police come to break up a party, everyone gets thrown in the wagon and hauled away. It’s only later down at the station after a cooling off period that the innocent bystanders get separated out from the misbehavers. The chart below shows how all stocks in the group have turned sharply downward in the last month. It also indicates that even after the sell-off, over the longer term, Viacom remains the worst performer in the group and even after taking a big correction. High flyer Netflix remains the top performer by a wide margin but has staged some very large swings in both directions over the last couple of months. Source: CMC Markets What next for media stocks? We’re still working our way through the seasonally weakest time of the year for stocks in general between mid-August and mid-October, so we could see more volatility in the coming weeks. For the media sector specifically, the worst seasonal slump usually runs between the two biggest film festivals of the year from the Cannes Film Festival in May through to the Toronto International Film Festival (TIFF) in September. Source: CMC Markets, Bloomberg L.P. After TIFF, which runs from September 10-20 this year, speculation about the holiday box office and Oscar contenders starts to ramp up, which has historically driven a sector rebound into the year end. In the UK, the run up to the BAFTA’s starts with the London Film Festival which runs October 7th – 15th this year. Some of the potentially bigger movie releases of the fall season include: • Spectre (Nov 6) Sony • The Hunger Games: Mockingjay Part 2 (Nov 20) Lions’ Gate • Star Wars: The Force Awakens (Dec 18) Disney CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.