newsletter, I buy income-generating securities for the long haul --
reinvesting dividends for compound growth and income. But when I
see an investment with ridiculous fundamentals, coupled with a
repeating trend, it gets my trader's heart beating.
And that's what I see when I look at the
Gabelli Global Multimedia Trust (
GGT is a
specializing in global media companies. It has a solid portfolio of
television networks and digital television service providers.
Telecoms, which are usually stable cash-flow generators, account
for about a quarter of the fund's holdings.
The "Mad Men" Fundamentals
Ad spending is on the rise and spiriting the profits of media
companies. In the latest wave of
posted a +17% rise in ad revenue, while local ad revenue was up
Comcast (Nasdaq: CMCSA)
and +29% for
News Corp's (Nasdaq: NWSA)
FOX television network.
Discovery Communications (Nasdaq: DISCA)
saw international ad revenue soar +38%.
And the trend to spend -- at least on advertising -- will likely
continue. The mid-term political ad spending spree is almost upon
us. And consumer product and retail stores need to push their
brands on still-cautious consumers. For instance, a recent article
The Wall Street Journal
confirmed that General Motors was increasing its ad spending to
pre-bankruptcy levels. GM's marketing chief said, "We have to build
up the brands."
GGT holds all the big media players, coupled with some dependable
cash-producing telecoms. And while it is a bit thinly-traded, GGT
makes for a nice trade just on the fundamentals alone. But it's
cycle that has the potential to make this a sweet short-term play.
The Anti-"Dividend Capture" Trading Strategy
In the income world, many investors employ what is known as a
dividend capture strategy. They swoop in on a high-yielding
security just before its ex-dividend date. Once they qualify for
the dividend, they're gone with the wind.
The bigger the dividend payout, the more chasers in the hunt. A
thinly traded security can see big price movements before its
ex-dividend date -- often much bigger than the actual payout.
GGT suspended its dividend at the end of 2008 in an effort to
preserve capital during the financial crisis. But in March of this
year, the fund reinstituted a juicy dividend, which at current
prices represents a
And nothing gets a dividend chaser in the hunt faster than a
GGT is small, with a market cap of roughly $100 million. About
25,000 shares trade on a good day. Needless to say, it won't take
much interest to move this fund.
We dividend investors understand the ex-dividend "cycle" like the
backs of our hands -- especially when it comes to double-digit
yielding securities. Prices rise in the weeks prior to the
ex-dividend date, then ebbs. I'm actually surprised more traders
haven't taken advantage of the predictability of the swing.
The fundamental strength of GGT's holdings -- and the added push by
dividend hounds -- makes this a perfect vehicle for an
anti-"dividend capture" play. And the beauty of this play is that
you can go back and do it again -- quarter after quarter.
Of course, I'll be holding GGT for the long haul in my
portfolio. But as I watch the price rise during the next few weeks,
as I believe it will, I'll be pleased to know there are traders out
there profiting from the cycle.
Action to Take -->
Based on the analysis above, I believe GGT is a good trade to put
on now, but traders will want to exit this position by September
10th -- before the next ex-dividend date. I would also recommend
setting an initial stop loss at $7.04, just to be on the safe
-- Amy Calistri
Amy Calistri is the Lead Investment Analyst behind
StreetAuthority's Stock of the Month and The Daily Paycheck. Amy
has broad experience in finance, including helping to manage over
$5 million in trust funds for a non-profit. Before joining
StreetAuthority, she created and taught online investment courses
used by Bloomberg.com and National City Corporation and even worked
with noted economist James Galbraith, with whom she authored
several publications. Read more...
Disclosure: Neither Amy Calistri nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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