six flags logoSix Flags Entertainment Corp (NYSE:SIX) has been anything but a roller coaster ride and is up over 360% in 3.5 years. This type of growth is surely unsustainable. Is this the time to cash in your long position in Six Flags and possibly go short?

Today’s ‘Trading Lessons From A Hedge Fund Trader’ will focus on Six Flags Entertainment Corp (NYSE:SIX) as per our reader’s request for research, available here at

Revenue increased 4% from $485.1 million to $504.5 million and the attendance grew 2% in the quarter. Seems like a solid quarter doesn’t it. There’s a BUT.

But Six Flag’s net income dropped 52 percent in the third quarter. The bad quarter was strongly influenced by the implications of a roller coaster fatality in Arlington Texas on July 19. Death by roller coaster is never good for business. You want to thrill the riders, not kill them.

On the financial side, It doesn’t matter how much you grow your revenue, I’m more concerned on how much of that revenue you can keep. It’s the bottom line baby, what is your net income, that’s the final score.

Fundamentals are one thing, but it doesn’t give you the entire picture to the overall health of the stock price.

The third quarter earning call can be heard here.

Let’s take a look at the long term chart

SIX 3yr chart

The move from early 2010 is a thing to behold. The stock price grew from $7.50 to a high of $40 and the kicker is that you get a Dividend yield of 5.13%. Sounds too good to be true. You can’t have your cake and eat it for too long. At some point the all good things come to an end.

The market loves momentum stocks and dividend stocks and Six Flags gives you both. Six Flags is still a dividend play but what happened to the momentum in the stock?

SIX vs spx 6 months

The S&P has been steadily going higher while Six Flags stopped going up in May 2013. Six Flags is off 13% from its highs while the S&P is almost 6% higher since May.

If you are a hot stock then you don’t ever, EVER want to be trailing the S&P500 by 20%.

What about the competition?

The Walt Disney Company (NYSE:DIS) is at it 52 week highs. Take a look at my articles (fun article with Brett Favre analogy and hard core trading article) on Disney.

Cedar Fair LP (NYSE:FUN) is right at its 52 week high. I also wrote an article on this company as well.

This is not a good sign for Six Flags. Why? Because I’d rather own the strongest stocks in the industry and sell and short the weaker looking stocks. The market is telling me that Six Flags in the ugly sister in this group.

I’m sorry to say that but that’s what the stock price of DIS, FUN and SIX is telling me. I wanted to short Disney but you can’t short a stock when the technicals are that strong, so instead of shorting plan A, we look for the ugly sister plan B stock. It’s a safer play and more of a sure thing.

I listened to the third quarter conference call and they highlighted all the good stats and many analysts made the comment ‘good quarter’ but you’re better off listening to the market and the actual price of the stock. Good quarters only count when your stock price reflects your accomplishments.

The price of the stock is the real test, that’s where the money is. Sure all forms of analysis sound nice, it’s similar to pro athletes excelling in the pre-draft combine, that where they measure your speed, height, wing span, jumping ability but the truth always comes out in the field.

Do you want to own the stock with the stellar fundamentals or the stock that continually goes up?

I am curious to see where the market opens after the earnings release.

Six Flags offers a great risk reward setup. It will most likely be recommended in the Flagship Newsletter in the very near future.

For information regarding stocks we do like, check out our Flagship and ETF Newsletter.

This is a cursory look at Six Flags Entertainment Corp (NYSE:SIX) and we are not making any specific buy or sell recommendation but merely voicing our opinion of the current situation. Each individual investor must conduct their own due diligence of both the company, the market sector as well as their own financial situation and risk parameters.

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