I mentioned the criteria I considered for this broad selling when I posted earlier, and I sold a fair number of stocks on Wednesday. So why Lionsgate?
Well, I like LGF the company quite a lot. I think that it's very well run, and I like their strategy of producing lower cost niche films and developing a large and valuable film and TV library that should increase in value as distribution of the "long tail" grows for filmed content.
But I don't think there's any one thing in the next six months that's going to move LGF markedly -- this is a longer term play, which might possibly result in a takeover within the next several years. The company is not particularly hit driven, so while the Saw III release this fall should help their bottom line, it won't markedly impact earnings.
And as long as I'm whittling down positions to reduce my exposure to expensive margin loans, it's hard to justify holding on to a company that I believe will do well in the long term, but is at least as likely to dip on a bad film than to climb on a good one. Much as I did with IMAX, which is in a similar business, I'm holding on to my non-margined shares of Lionsgate and I continue to believe it's a good play for the very long term (3-5 years), but I don't feel confident enough in any near term catalysts to make it worthwhile to hold on to this smallish position with borrowed money.
So I sold about half of my LGF position on Wednesday at $9.28, a small loss of about 7% from my purchase at an average cost of close to $10. I continue to hold on to the remainder of my LGF position at an average cost of about $10.47. Some of my other recent thinking about Lionsgate, and my rationale for buying the shares initially and holding them to this point, is available here.
LGF 1-yr chart: