COVID-19 turned the entertainment industry on its head in 2020. And just when things were looking normal again, the omicron variant showed up.

No one wants another lockdown, but some countries are already taking steps to ward off the spread of another variant.

In this week’s Investing With Charles, research analyst Matt Clark and I reflect on entertainment during the pandemic. We also compare two entertainment stocks, streaming giant Netflix Inc. (Nasdaq: NFLX) and theater stalwart AMC Entertainment Holdings Inc. (NYSE: AMC), to see which is the better buy.

Here are some highlights from my conversation with Matt:

Omicron Spooks Investors

Matt: In addition to earthquakes in Peru (where we find Charles currently), another big thing coming out over the last weekend was the new omicron variant of the COVID-19 virus. This one was discovered in southern Africa — South Africa, Namibia, Mozambique — and has now spread to include parts of Europe, including the Netherlands, Belgium and Germany. Nothing so far here in the United States, at least not as of this recording. [Note: The U.S. just confirmed its first case of the omicron variant in California on Wednesday.]

It sparked fear in the markets the Friday after Thanksgiving during a shortened trading day. Major indexes plummeted 2% or more in one day, marking the worst day of the year for the markets.

But I think a larger question persists here. We see these variants come out, and we’re in the holiday season. There’s more and more family gatherings and things like that planned. And now we’ve seen countries that are shutting back down again, with Germany implementing travel restrictions and closing parts of the country. Austria and the Czech Republic are taking similar action.

This leads me to our topic today. At the height of the coronavirus pandemic in 2020, entertainment was nonexistent.

Charles: We had nowhere to go.

Matt: There was nowhere to go. You were, well, stuck at home.

We saw the rise of Netflix, Disney+, Hulu, Amazon Prime. These streaming services allowed us to take in entertainment without leaving the safety and comfort of our home.

And then, as we come into 2021, something interesting happens. AMC, a large theater chain not just here in the U.S. but also around the world, shot up massively as it became a meme stock. A wave of smaller investors poured money into the beaten-down stock. We saw it jump hundreds of percent higher in a flash.

AMC Stock Performance

So today, I want to compare a stock like AMC, which is now reopening theaters, against Netflix Inc. (Nasdaq: NFLX), which is in that tried and true Steady Eddie streaming service.

Are You Not Entertained?!

Matt:  I found a study done by Hub Entertainment Research back in July 2021. It asked the question: How do people expect to watch movies in the next year?

This was after the pandemic had been somewhat quelled after new cases flattened out and people were getting vaccinated. Here are the results:

  • 29% of those who responded said they would still mostly stream movies at home.
  • 27% said they would mostly go to the theater.
  • 20% said they would do both.
  • 24% said they wouldn’t do either. They wouldn’t stream at home or go to the movies.

Charles: What are they doing? I’m confused. Do they have books and stuff? How does that work?

Matt: Reading. Is that making a comeback? I’m not sure, but nonetheless, it speaks to our wanting to be entertained, but yet still being conflicted on the best way to do it.

So, how does this impact AMC, a company focused on theater entertainment, compared to Netflix, which wants you to stay at home?

Charles: Well, let’s back up for a second. Let’s go back to the variant and why discipline is scary. And it comes down to one thing. There are going to be new variants. There are always going to be new variants. A variant by itself is not necessarily a problem or anything to panic about. It comes down to whether this particular variant is going to evade the vaccines or not. If it blows through the vaccines, then we’re right back to square one, and that’s scary. That’s why the market sold off so badly the day after Thanksgiving.

But if it turns out that this variant, while a little bit different than the others, doesn’t blow through the vaccines worse than, say, the delta variant, then you’ll see people cool off relatively quickly. The reason everyone was panicking right after the news hit was because we just don’t know yet. And it’s going to be another couple of days until we do. So, we’re all in fingers crossed, wait-and-see mode.

Most People Stream Series, Not Movies

Charles: Now, back to the theaters. There’s a couple of things going on. I stream a lot of content. It’s almost hard not to, these days. I don’t have cable. I don’t even know what’s on network TV anymore. Most of the content I watch, I stream.

My own anecdotal experience here matches what the data shows. The data shows that about 85% of the streaming being done is not movies. It’s series and shows. Netflix is the master of the eight- or 10-part miniseries. That’s really a good format for them and for Disney as well. Amazon’s getting there.

So, what people watch when they stream, for the most part, are series and programs. They stream movies, but less often — about 15% of the streaming they do is movies. That‘s great for AMC because it implies that movies are still a distinct product. This was already happening before the pandemic struck.

Watch the rest of my conversation with Matt about AMC and Netflix stock here.

Where to Find Us

Coming up this week, Matt will have more on The Bull & The Bear podcast, so stay tuned.

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To safe profits,

Charles Sizemore_Sig

Charles Sizemore

Co-Editor, Green Zone Fortunes

Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.