Decline of the Silver Screen Industry?

How consumers choose to view movies has been changing over the past few years with a move towards home viewing using companies such as Netflix and Amazon Prime. This viewing trend is beginning to take its toll on both film and television studios, as theatres are becoming a less popular option for viewings. Currently Americans spend around $11 billion on going to movie theatres every year and a further $12 billion on home video rental and purchase (both physical and digital). Home purchase, however, was down by 7% in 2016, compared with the previous year, while subscription streaming leapt up by 23% in the same time period to $6.23 billion.

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Film companies are beginning to tap into the financial benefits they could reap from employing more watch on demand options when it comes to new films. Premium video on demand (VOD) has the potential to be two to three times more valuable to studios that movie ticket sales, and, as a result, some Hollywood studios are looking into the benefits of in-home releases of new movies. These early-release films would be available to see at the same time as, or shortly after, theatre release and would cost home viewers around $30 to $50 in comparison to the $5 to $7 currently paid to view movies months after the release day.

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While this shift in focus to subscription streaming could benefit, and boost revenue, of Hollywood movie studios, the impact could be negative for movie theatre companies. In the past two months Imax China has seen share prices fall dramatically. Nomura analyst Richard Huang has said that four reasons were put forward for this drop, one being wide-spread concern that there is a drop in consumer interest for premium movie viewing experiences and that, as a result, Imax will begin to face structural market share loss. This, and the other three reasons – concern over dwindling popularity of Hollywood blockbusters, a belief by some that Imax is choosing the wrong movies to screen, and the suggestion that the majority of new Imax screens have been installed in lower-tier cities – has resulted in Imax stock values falling by 40%.

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As the movie industry moves into this state of transition, several companies within the sector have seen drops in stock price. Opening on the 5th of July Walt Disney shares were down 1.4% to $105.98, while Lions Gate Entertainment experienced a drop of 1.3% to $27.77, and Regal Entertainment Group declined to $20.07, down 1.5%. It remains to be seen if this downward trend will continue for movie companies or if the proposed, alternative audience viewing options will reverse the losses.

(Please note: James O’Leary does not currently hold a position in Netflix, Amazon Prime, Imax China, Walt Disney, Lions Gate Entertainment, or Regal Entertainment Group. Henry James International does not currently own a position in Netflix, Amazon Prime, Imax China, Walt Disney, Lions Gate Entertainment, or Regal Entertainment Group, for any client portfolios).

The Rise and Fall of the Metal Market

Many investors look at gold as a safe bet, an insurance policy for times when other stocks are less certain. In this year an ounce of gold has increased in value by almost 13%, to $1,296. There are two schools of thought about why the commodity has experienced such a high level of growth after having been uneasy in the first part of this year. The first is that this increase comes off the back of political unrest. As political tensions grow both in the US, with continuing problems among the Trump administration, and in the UK, with the recent attacks as well as the general election, some believe that these could begin to affect the economy, and upend corporate profit growth. Gold is a stable way for investors to hedge their bets against this possibility.

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Another idea is that, rather than gold prices being increased as a result of politics, the rise could be linked more to the state of the economy and monetary policy. The US dollar is currently near a seven-month low compared to other world currencies and it has been observed on several past occasions that as the dollar falters the price of gold rises. Others believe that recent rise and fall in gold price is seasonal, with Frank Holmes, CEO and Chief Investment Officer of US Global Investors saying that there is a 60-70 % chance that the price of gold will experience a general upward trend between June 2017 and January of next year.

While gold may be a safe bet in its current state there are also other metal commodities worth following. As the demand for electric vehicles continues to grow, so will the demand for both lithium for batteries and copper for wiring, making these possible safe and lucrative investment options.

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The auto industry is also responsible for an upward trend in the price of palladium, a crucial component of catalytic converters. After having sunk to $657.50 per ounce in December 2016 the precious metal has risen by 24% in 2017 to a current price of $856.60. However, while it has regained its ground having been near a seven-year low since January, there are concerns that palladium may not be able to maintain this as there is a slowing in car sales in the US, Europe, and China. In the US car sales fell again in May, contributing to a consecutive five month decline, while in the EU, although sales rose by 4.7% in the first four months of 2017, they then dropped by 6.6% in April. Other countries have, however, experienced continued growth in auto sales, such as Canada whose sales increased by 11% in May. The result is divided opinion on the future of palladium, with some believing that it has reached its peak and others of the opinion that it will hold its ground and possibly even continue to appreciate in price.

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Positive Developments in the Biotechnology Market

*All content in this biotechnology blog represents the opinion of James O’Leary*

In recent weeks the biotechnology market has seen great changes, with the development of new medicines and medical software. The outcome has been an increase in interest in various companies and, by extension, an increase in the stock prices of these companies.

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A large market is developing for drugs that fight cancer through using the body’s own immune system. Incyte has developed a medicine, called Epacadostat, which does that and which has caused quite a stir among investors and some of the biggest drug makers in the world. The exciting development of this new drug has resulted in Incyte shares increasing in value by 76% in the last year, while revenue has jumped from just $1.1 billion to $28 billion in the same time period. In 2017 alone Incyte stock has increased 36% in value, making it one of the S&P 500 best performers of 2017 within the drug sector.

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(Please note: James O’Leary does not currently hold a position in Incyte. Henry James International does not currently own a position in Incyte for any client portfolios).

Invitae

Also making recent waves in biotech news is Invitae who have announced that they are launching a platform on which patients will be able to anonymously upload their genetic information, initially focusing on the information of cancer-related patients. The idea behind the development of this database is that more readily available data will allow developers to make bigger advancements towards important medical discoveries. Following the announcement of this new platform, Invitae’s shares increased in price by 2.79%, closing on the 6th at $11.05, while year-to-date the company stock has experienced a gradual rise of 39.17%.

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(Please note: James O’Leary does not currently hold a position in Invitae. Henry James International does not currently own a position in Invitae for any client portfolios).

Neurocrine Biosciences

The first product for treating the movement disorder Tardive Dyskinesia (TD) in adults has been developed by the company Neurocrine Biosciences. The announcement that the drug, Ingrezza, has been FDA approved was followed by a sudden 22% jump in Neurocrine stock prices, which closed at 24% on Wednesday 12th. At close on the same day Neurocrine’s shares were up 33% on a year-to-date basis.

(Please note: James O’Leary does not currently hold a position in Neurocrine Biosciences. Henry James International does not currently own a position in Neurocrine Biosciences for any client portfolios).

Other News in the Biotechnology Sector

Similar increases in other biotechnology companies have also been observed, according to Barrons, with iShares Nasdaq Biotechnology (IBB) shares having climbed 0.34%, Vertex Pharmaceuticals (VRTX) lifting 2.42% to $177, and Healthcare stocks increasing by 0.24%. Three companies in the biotech sector that investors should keep an eye on are Biogen (BIIB), Alexion (ALXN) and Gilead (GILD). Biotech Research Analyst Alethia Young from Credit Suisse has estimated that BIIB will report earnings per share (EPS) of $5.14 instead of the $5.02 that the consensus predicts, while revenue will be $2.79 billion rather than the average estimate of $2.75 billion. Likewise Young believes that EPS and revenue for GILD will be higher than consensus estimates, with $2.46 instead of $2.28, and $6.94 billion over $6.6 billion respectively. As for ALXN, it is predicted that it will meet expectations throughout the year, if not slightly exceed them.

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Several biotechnology companies have seen increases in stock value as they have announced new developments and, according to Christopher Raymond, Senior Biotech Analyst and Managing Director of Raymond James, the commercial outlook for biotechnology is on the whole positive for 2017.

(Please note: James O’Leary does not currently hold a position in any of the companies mentioned above. Henry James International does not currently own a position in any of the aforementioned companies for any client portfolios).