To recap, VIAC was virtually on sale, with volatility at a three-month low on the top streaming stock.
As I type, our trade sits at about breakeven. But I’m even more bullish on VIAC today than I was last week.
But before I get into the “why,” l have another update for the Profit Takeover portfolio.
Our call option on the Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP) expires in about one month. And right now, we’re sitting at about a 30% gain.
It may not be the asymmetric return we were originally targeting, but as we approach next month’s expiration, I say we take this profit and run.
So, I’m closing the RSP June 18, 2021 $145 Call for $6.50.
Now, based on recent news in streaming, we can expect a much bigger profit from VIAC soon…
Why? Well, AT&T Inc. (NYSE:T) just announced plans to merge WarnerMedia with Discovery, creating a massive conglomerate with the potential to completely transform the streaming industry.
Want to know how the $130 billion deal affects your wallet? Because despite what Wall Street will have you believe, it does.
Mass mergers like this don’t just affect big-money trades. By picking the right stocks, you can turn 2021’s “streaming wars” into your next asymmetric return as well.
AT&T kicked off the week with big news.
The telecommunications company is going to spin off WarnerMedia, combining it with Discovery to create a new, singular company – one that will stream content from Warner Bros, CNN, Cartoon Network, HBO, The Food Network, Animal Planet, and more.
Before the opening bell, shares of T were already up 3%, while shares of Discovery Communications Inc. (Nasdaq:DISCA) shot up 16%.
Getting down to the nitty gritty of the deal, shareholders of T will get the majority of shares in the new company at 71%. DISCA shareholders get the rest at 29%.
The goal of this merger is obvious: T will receive $43 billion to help pay down the debt the company already has from its massive 5G investments. And with a new company dedicated to streaming, T can put its focus on competing with other telecommunications companies like Verizon and T-Mobile.
Meanwhile, the new company will compete with the streaming kings: Netflix Inc. (Nasdaq:NFLX) and Walt Disney Co. (NYSE:DIS). And nothing pushes up a stock quite like competition.
A mass-merger sounds like bad news for top streaming companies like NFLX and smaller ones like VIAC. But that’s not the case. This competition is bullish for the entire streaming industry, and I see it boosting shares of these companies in the long run.
Change is on its way for the future of entertainment. Streaming will still be king, sure – but consolidation is coming.
It’s just like what we saw cable go through in the ’90s. Cable channels used to exist on their own. But that changed over a decade ago, when Time Warner bought CNN, TNT, and TBS, for example.
Today, the top six biggest entertainment firms own the majority of cable channels.
Streaming used to be dominated by Netflix. But then, companies quickly began pulling content from Netflix to create their own streaming sites. We went from one streaming subscription to 10 – and that’s a lot of passwords to remember, especially if you’re using your sister’s husband’s cousin’s Hulu account and your dad’s coworker’s daughter’s Netflix.
But now, the opposite is happening. And in a few years, you may just need one to three subscriptions.
Consolidation is coming. But in the meantime, competition is fierce – setting up incredible opportunities for your potential portfolio.
To track our VIAC trade – and the other five open trades in the Profit Takeover portfolio – just click here.
Now, today is a big make-or-break day for the market. Depending on whether stocks continue last week’s sell-off or reverse to a return to new highs, we could be looking at a new market.
But whether we move up or down, we know how to profit. And once I watch today’s market play out, I’ll be back tomorrow to tell you exactly what to expect next.
May 17 2021