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trying to figure out a strategy for the coming year for my portfolio. Stocks are starting to feel a little better to me, but I'm very, very cautious about timing in terms of trades. For instance, I'd rather wait until we see a substantial pullback from the recent rally before taking some of my cash on the sidelines and putting it to work. But I've got two ideas in the movie sector that I'm looking at: DreamWorks Animation (NYSE: DWA) and Marvel Entertainment (NYSE: MVL).
First off, both are great companies. No, not every move they make is perfect (example: Marvel still can't properly monetize its Incredible Hulk property with a decent film). But both stocks have held up relatively well, in my opinion, during the financial implosion. Both stocks are also below their respective 52-week high's and above their respective 52-week low's. That's not a bad position to be in (although I should point out that I generally would like to get these two around their 52-week low's). But which stock has the edge?
Well, Marvel's shares have been strong lately. According to the AOL quote at the time of this writing, Marvel is in the green in all time frames (year-to-date, one-month, one-year, etc.). DreamWorks Animation is in the red in a couple spots, but for the most part, it's been performing somewhat similarly to Marvel. I don't really see that much of a difference in terms of strength. Plus, both are arguably essentially equal in terms of valuation (at least in my opinion).
I think the kicker here is the issue of catalysts. What does Marvel have coming up? Well, News Corp. (NYSE: NWS) will be releasing X-Men Origins: Wolverine to theaters this summer. That has a decent chance of being a blockbuster. In fact, maybe it even has a better chance of attaining success than the DreamWorks cartoon, Monsters vs. Aliens, which is due to be released this spring. After all, this is a new property whereas Marvel has some history behind it in terms of Wolverine and X-Men. Of course, we shouldn't discount DreamWorks Animation and its skill at developing new franchises. But here's the bottom line: Marvel investors are really counting on the company's self-produced features to bring in the big profits. The Wolverine picture just won't yield as much in terms of profits because Marvel didn't take much risk on it. Marvel merely licensed the brand.
Because Marvel doesn't have a self-produced film lined up for '09, I think I may personally take a closer look at DreamWorks Animation as a potential buy candidate. Don't get me wrong, I could still go with Marvel. I've owned it before, and do want to own it again ahead of its 2010 self-produced slate (which, if all goes according to plan, should include Thor and the sequel to Iron Man). Without a major catalyst, though, I'm just not sure my appetite is craving Marvel. That's my thinking as of now. Again, I'll say that before I make any purchase, I'd like to see this market cool down a bit. I'd rather not buy a stock for any more than I have to...
Disclosure: I don't own any company mentioned, but positions can change without notice.
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Reader Comments (Page 1 of 1)
1-07-2009 @ 12:52PM
Mike O said...
Both appeal to different audiences. Dreamworks is basically Pixar Lite and Marvel goes for the tween/teen/young adult audience.
Both are money makers, so it comes down to content.
Kids stuff is an easier sell, so I believe Dreamworks will be more consistent in the long run.
Marvel, on the other hand, tends to make big budget blockbusters which entails a high risk/reward factor. Iron Man made a killing at the box office. Their Nick Fury film could be a dud for all we know.
Both are smart and well run. You could make a quick buck with Marvel. I'd hold Dreamworks for the long term.
1-07-2009 @ 10:18PM
williedynamite24 said...
Marvel is the obvious choice here. Many investors aren't thinking long-term when it comes to this one. Releases such as Thor, Iron Man 2, Spider-Man 4, Captain America and the Avengers will reap big rewards in the years to come.Licensing when paired with the self-production of blockbusters will result in boat loads of profits. Load up now, or even when it dips a little bit and don't touch it for 4 years. Thank me later.