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Cinemark (CNK) Stock Plunges 66% on Solvency Risk

Bernzott Capital Advisors recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -32.76% (net) for the quarter, outperforming its benchmark, the Russell 2000 Value Index which returned -35.66% in the same quarter. You should check out Bernzott Capital Advisors top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Bernzott Capital Advisors highlighted a few stocks and Cinemark Holdings Inc. (NYSE:CNK) is one of them. Cinemark operates movie theaters. Year-to-date, CNK stock lost 66% and on May 13th it had a closing price of $12.18. Its market cap is of $1.36 billion. Here is what Bernzott Capital Advisors said:

“Cinemark (CNK): CNK, a motion picture exhibition operator, reported 4Q19 results up short of consensus estimates and last year. All of the company’s theaters are closed and there is no timetable for when they will reopen. Upon reopening, it is not clear that it will be “business as usual” given conjecture about continued social distancing. Studios have delayed new content and there may be additional changes to the timing (theatrical windows), and delivery of the content (simultaneous theater and streaming release). Further issues include how quickly people will return to theatres, and whether operators will be able to fill seats and rows. CNK is a best-in-class operator with a strong management team and a better balance sheet than its peers, but solvency concerns drove our decision to sell after the end of the quarter.”

In Q4 2019, the number of bullish hedge fund positions on CNK stock decreased by about 4% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with CNK’s downside potential.

Disclosure: None. This article is originally published at Insider Monkey.

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