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DaveGruska (90.70)

How I almost missed Lionsgate

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March 21, 2012 – Comments (0) | RELATED TICKERS: LGF-A

I briefly looked into Lionsgate (LGF) over a year ago after I saw "The Conspirator", but was not impressed with it's long-term debt (and am even more so not now), and figured things must really be messed up if Carl Icahn is involved. I did remember noting at the time that they were one of the few movie outfits that seemed to really get and embrace digital distribution, and were building a nice catalog of decent shows/movies (Expendables, Saw, Mad Men, etc.) . So I kept them on my radar for a bit, but forgot about them after a while.

Then I read, with skepticism, an interesting article on Seeking Alpha by Chris Katje (http://seekingalpha.com/article/289012-new-movie-franchise-has-the-potential-to-transform-lions-gate-films). I had never heard of The Hunger Games, but I did confirm that it was ripping up the charts on Amazon.com. I read up about it, and it just sounded stupid to me. But I am not the target market. I kept telling myself that, and eventually decided to buy some shares for my speculative portfolio, as it meets hardly any of the criteria I set for myself for my regular portfolio. But I figured I'd wait for earnings. They were not good, but the stock still went up. I reconsidered. I waited for earnings again. Not good. Stock goes up again. Strange. LGF went from $7 to almost $9 during this time.

Jan 3rd, this year, I decided to buy some shares and be done with it. I'm happy I did - I'm sitting on a double at this point. It seems like the common knowledge now to sell on Friday, before the film is release (at least if you follow stocktwits.com), but I'm going to hold. I am impressed that they plan to pay down a lot of debt with the proceeds from The Hunger Games, I'm glad they finally pulled off the Summit buy, getting some great people in the deal, to boot, and there are three more Hunger Games movies left (and one more Twilight film).

The numbers don't make sense. They didn't at ~$8 a share, and they certainly don't now. People get excited - that's good, especially if the company behind the stock can back it up. I think they can - there is some serious potential here if the early film reviews and Fandango sales records are any indication. Oh, and now I want to see The Hunger Games, too, and I can't even explain why (maybe just to pay some respect to the film that is padding my pockets...).

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