North American consumers are benefitting from an unexpected treat this summer: lower gasoline prices.
Historically, gasoline prices have moved higher from February to July as the summer driving season approaches. This year gasoline prices moved higher from February, but peaked in the first week in April. Subsequently, wholesale prices have dropped 22 per cent. North American consumers are taking advantage by spending less on gasoline and more on fun events during summer holidays.
At least some of the extra cash is going to the film industry.
Unlike the preponderance of low budget movies released last summer, the film industry is launching a series of blockbusting, high-revenue movies this summer. Some already have attracted record revenues including The Avengers and Men in Black 3. More are coming this summer including The Amazing Spider-man, Rock of Ages and Brave. Second- and third-quarter revenues and earnings by the film industry as well as its related toy and restaurant industries are expected to show higher than average gains on a year-over-year basis.
The easiest way to invest in the phenomenon is to own the PowerShares Dynamic Leisure & Entertainment Portfolio (PEJ-N).
This Exchange Traded Fund holds a portfolio of 30 well-known leisure and entertainment stocks. Its largest sub-industry allocation with approximately a 50 per cent weight in the portfolio is restaurants including Starbucks, Yum! Brands, Chipotle Mexican Grill, McDonalds and Dominos Pizza. Other sub-industry sectors include Casinos & Gaming, Movies & Entertainment, Hotels, Resorts & Cruise Lines and Internet Retailing. Positions are held in well-known big-cap names such as Priceline.com, CBS, Walt Disney, Viacom and Marriott Vacations.
Trading suitability of the ETF is moderate.
Average daily volume during the past two years is approximately 30,000 units. Management-expense ratio is 0.63 per cent. Units trade on the New York Stock Exchange.
Seasonality data on the ETF is sparse because the fund was launched only seven years ago. Available data shows that the ETF has a period of seasonal strength from the beginning of July to the middle of September. Average return per period during the past five periods was 9 per cent.
On the charts, units have a mixed, but improving technical profile.
Intermediate trend is neutral. Support is $20.25 and resistance is at its all-time high at $22.70. Units trade above their 200 day moving average, but below their 20 and 50 day moving averages. Short term momentum indicators are recovering from oversold levels. Strength relative to the S&P 500 Index has been positive since last October. Preferred strategy is to accumulate units on weakness closer to short term support at $20.25 between now and early July for a seasonal trade lasting until September.
Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst at Horizons Investment Management, offering research on Horizons Seasonal Rotation ETF (HAC-T). All of the views expressed herein are his personal views although they may be reflected in positions or transactions in the various client portfolios managed by Horizons Investment. Horizons Investment is the investment manager for the Horizons family of ETFs. Daily reports are available at http://www.timingthemarket.ca/