Let Us Entertain You
I've noticed a pocket of relative strength on my watch list that I'll loosely call the entertainment sector. These stocks aren't setting new highs, but they're holding up fairly well while so many others are collapsing, which is what I look for in a general market downturn.
First off, I'll note that Disney (DIS) is holding up well. I'm mostly interested in Disney for sentimental and educational reasons: my son has been entranced with Disney parks and theme parks in general since an early age, so I bought a few shares for his account to try to encourage his interest in the stock market. Otherwise it's not the type of company that interests me and I don't have anything else to say about it.
A more offbeat and serious holding is Marvel Entertainment (MVL), which I commended yesterday for its low-risk business plan and relative strength. Today it was up marginally, holding in its very tight trading range while the market dropped yet again.
What really intrigues me is the New Economy entertainment companies, which are trying to make money from people playing elaborate fantasy games with casts of thousands on the Internet. The buzz phrase here is massively multi-player on-line role-playing game (MMORPG), which my son tells me is pronounced "more-peg". Forbes or someone characterized these games as addictive, and I know I've struggled with addictions to games just slightly more involving than Pac-Man, so this sounds like the crack cocaine of addictive games. Selling an addictive product that doesn't kill people is a business plan I can get excited about as an investor.
For some reason MMORPG is most popular in Asia, and the leader there now appears to be Netease.com (NTES), which I've looked at occasionally but never liked the chart. At the moment it appears to be holding on by its fingernails. A competitor I do own is The9 Ltd. (NCTY). That is not a typo, by the way. It has pulled back recently but nothing too drastic so far. The really interesting chart right now belongs to GigaMedia (GIGM), which has had a huge run from November through April, multiplying by more than 5 in that time period. Instead of giving back big chunks like you'd expect in a nasty market downturn, GigaMedia's stock price has gone flat, just like Marvel. This is another stock that people are not in a hurry to sell. Thanks to anonymous for pointing out this stock to me in a comment a few days ago.
Finally, there was an interesting story on a fallen angel called Shanda Interactive (SNDA), the former MMPORG leader in China that lost its position. The stock was in free fall from August 2005 through March, then arguably began a base-building process (price comparatively flat) with fairly low volume, as shown in the chart below. Today they came out with earnings and claimed that they have solved their problems. I have no idea if this is true but someone with money believed them because they drove up the price 9% on almost 4 times average volume. Although I usually ignore fallen angels, I think this situation is worth watching because sometimes a big move out of a base like this ignites a huge rally. If we get a breakout above the current trading range with good volume, it would be a high-risk, high-reward buy signal.
First off, I'll note that Disney (DIS) is holding up well. I'm mostly interested in Disney for sentimental and educational reasons: my son has been entranced with Disney parks and theme parks in general since an early age, so I bought a few shares for his account to try to encourage his interest in the stock market. Otherwise it's not the type of company that interests me and I don't have anything else to say about it.
A more offbeat and serious holding is Marvel Entertainment (MVL), which I commended yesterday for its low-risk business plan and relative strength. Today it was up marginally, holding in its very tight trading range while the market dropped yet again.
What really intrigues me is the New Economy entertainment companies, which are trying to make money from people playing elaborate fantasy games with casts of thousands on the Internet. The buzz phrase here is massively multi-player on-line role-playing game (MMORPG), which my son tells me is pronounced "more-peg". Forbes or someone characterized these games as addictive, and I know I've struggled with addictions to games just slightly more involving than Pac-Man, so this sounds like the crack cocaine of addictive games. Selling an addictive product that doesn't kill people is a business plan I can get excited about as an investor.
For some reason MMORPG is most popular in Asia, and the leader there now appears to be Netease.com (NTES), which I've looked at occasionally but never liked the chart. At the moment it appears to be holding on by its fingernails. A competitor I do own is The9 Ltd. (NCTY). That is not a typo, by the way. It has pulled back recently but nothing too drastic so far. The really interesting chart right now belongs to GigaMedia (GIGM), which has had a huge run from November through April, multiplying by more than 5 in that time period. Instead of giving back big chunks like you'd expect in a nasty market downturn, GigaMedia's stock price has gone flat, just like Marvel. This is another stock that people are not in a hurry to sell. Thanks to anonymous for pointing out this stock to me in a comment a few days ago.
Finally, there was an interesting story on a fallen angel called Shanda Interactive (SNDA), the former MMPORG leader in China that lost its position. The stock was in free fall from August 2005 through March, then arguably began a base-building process (price comparatively flat) with fairly low volume, as shown in the chart below. Today they came out with earnings and claimed that they have solved their problems. I have no idea if this is true but someone with money believed them because they drove up the price 9% on almost 4 times average volume. Although I usually ignore fallen angels, I think this situation is worth watching because sometimes a big move out of a base like this ignites a huge rally. If we get a breakout above the current trading range with good volume, it would be a high-risk, high-reward buy signal.
posted by Houyhnhnm | 8:27 PM
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