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A Super-Investor Buys Up IMAX, Hedge Funds Follow

Insider Trading IMAXIMAX Corporation (IMAX) has seen its share of highs and lows since the technology first premiered at the Fuji Pavilion, EXPO ’70 in Osaka, Japan. Currently trading just 18% below the 52-week high, there has been a fresh block of purchases made by Kevin Douglas in the month of July.

Listed only as a large shareholder in most online resources, Mr. Douglas’ significance could easily be missed. The founder of Douglas Telecommunications, he agreed to pay $18 million for 2.73 million newly minted IMAX shares in May, 2008. One of the stipulations of that agreement was the requirement he would not purchase enough additional shares to acquire a 20% ownership stake for five years. It seems an interesting time for Mr. Douglas to begin purchases now that there is about 10 months left in the restriction on ownership. According to filings with the Securities & Exchange Commission, Mr. Douglas directly owns 13.2% of the outstanding shares, approximately 8.63 million. Through family trusts and other vehicles he is listed as an indirect owner of additional shares. The recent purchases made this month have been split to allocate 40% to himself as a direct owner and the remaining 60% of purchases are split into accounts held by family members or trusts.

Making his initial money as the founder and Chairman of Douglas Telecommunications, a VoIP company, he became an extremely successful investor with successes the best investment minds would envy. Mr. Douglas accumulated 18.5% of the outstanding shares of Westport Innovations Inc (WPRT) at prices up to $20 per share, which proved a success as the stock traded over $50 this past March. Another purchase of more than 300 thousand shares of Hansen Natural Corporation, now Monster Beverage Corp (MNST) were purchased in 2003 and 2004 for prices that averaged under $0.60 per share (see who else loves Monster Beverage). The stock traded as high as $83.96 in April of this year. These are just a few of the incredible investments Mr. Douglas has made. For the few people aware of his successes as an investor, any large purchase demands their attention.

Hedge fund managers are watching and see potential in IMAX as well. Of the 28 funds with holdings, 22 either initiated a new position in the stock or increased their holdings. Just six decreased the number of shares they held or exited the position entirely in the most recent reporting period. The largest hedge fund shareholder, John Murphy’s Alydar Capital now owns 3.3 million shares, an increase of 64% since the last report (see Alydar Capitals other top holdings).

Just announced Monday morning, IMAX has reached an agreement with AMC Entertainment which will expand their joint revenue-sharing agreement and will now include 138 theaters where IMAX films may be shown with the potential for an additional 10. The new agreement with AMC Entertainment will expand their footprint into areas that have never had IMAX available nearby.

Shares of IMAX are trading 28% higher year-to-date, and ~21x 2013 earnings estimates. Several fund managers are adding thousands of shares and the once largest investor in IMAX has begun buying as he nears the expiration of his ownership limitation. The same “Super Investor” with the uncanny ability to be in the right stock at the right time. IMAX looks enticing and may finally break through resistance near $26 and revisit prior highs.