Regal: Derivative Play on Star Wars

12/07/2015 8:00 am EST


Chris Versace

Editor, PowerTrend Bulletin, Growth & Dividend Report, and PowerTrader

One of my investing strategies is to go into the 'food chain' to find derivative plays that can really maximize overall returns, explains Chris Versace, editor of PowerTrend Profits.

Back in early August, I recommended that you add Walt Disney (DIS) shares ahead of the public relations efforts around the next Star Wars film. We’re already up double-digit percentages in that position.

But as we get closer to the December 18 release date for Star Wars: The Force Awakens, the upcoming movie already has broken pre-ticket sales records and is likely to set a box office record for the month of December.

This, of course, means that more bodies will be in movie theater seats buying high-margin drinks and snacks.

The derivative play in this case would be movie theater stocks; however, only one of them in my mind has the right combination of upside in the shares and a rather appealing dividend yield.

That company is Regal Entertainment Group (RGC). The stock is head and shoulders above competitors AMC Entertainment (AMC), Cinemark Holdings (CNK), and Carmike Cinemas (CKEC).

Regal Entertainment offers a 4.6% dividend yield. The stock also has the lowest price-to-earnings ratio on expected 2015 earnings amongst its peers.

As such, my recommendation to you in order to help you double dip on the upcoming Star Wars blockbuster is to add Regal shares to the dividend side of your portfolio.

Put it all together and it’s a pretty good combination with significant upside. I would look to scale into the shares below $17.50.

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