The Force Is Strong With These 8 Star Wars Stocks
Avengers, dinosaurs and minions, step aside. You may have ruled 2015 so far, but this winter belongs to the Jedi and the Sith.
A decade after the release of "Star Wars: Episode III -- Revenge of the Sith," the Star Wars universe is reopening in December with the first film since creator George Lucas sold his vision to the merchandising might of The Walt Disney Co.
Star Wars fans are nearly beside themselves with anticipation for "Star Wars: Episode VII -- The Force Awakens," -- and Wall Street investors should be anticipating some big profits as well. After all, as a movie franchise, Star Wars has become as significant to Americans as baseball and apple pie, and it's been a long 10-year wait.
Disney paid $4 billion for the franchise in 2012, but by some estimates, Star Wars has generated a whopping $27 billion in box office sales, DVDs, video games, toys and books. And that's before the next trilogy of movies and before Disney's marketing machine goes into high gear to promote the new generation of films.
If you want to make some money off Star Wars-mania this winter, the time to invest is now. And savvy investors need to do their homework if they want to cash in on the Star Wars moneymaking machine.
It's as our old friend Obi-Wan Kenobi once said: "In my experience, there is no such thing as luck." Investors need to make their own luck by locking in on Star Wars-related equities.
1. The Walt Disney Co. (ticker: DIS). For its $4 billion investment to buy Lucasfilms. Disney is unquestionably the company with the biggest stake in the new Star Wars films. You can expect "Star Wars: Episode VII -- The Force Awakens" to be the biggest movie of the Christmas season -- the other six films collected a combined $4.4 billion in box office revenue -- and Disney will primed to make this the biggest "Star Wars" yet.
Disney's signature parks are already on board, with Disneyland offering Star Wars weekends and Star Wars-themed marathons. And Disney Cruise Lines is offering eight daylong Star Wars-themed cruises in 2016 that will give fans a chance to mingle with Chewbacca and other iconic characters. Disney CEO Bob Iger has also promised a far greater presence of Star Wars at the parks, including a possible expansion, but hasn't given details.
Disney stock is up 27 percent so far this year, but is battling some slippage in the popularity of its all-omnipresent ESPN sports cable network. Star Wars may be just the thing to give DIS stock a boost headed into 2016.
"Disney has a lot of momentum right now, and it is one of the few large companies that really seems to be doing well. And this is before the release of the Star Wars installment, which will almost certainly be one of the biggest movies in history by box office sales and merchandise sales," says Charles Sizemore, founder of Dallas-based Sizemore Capital Management, an investment advisory firm. "But the thing to remember about Disney is that ESPN is its main cash cow. Disney's media networks make up about 60 percent of company profits, and this is completely dominated by ESPN. With TV slowly moving to an unbundled a la carte model, Disney's long-term future here is uncertain."
2. Mattel Inc (MAT). The maker of millions of Hot Wheels toy cars, Barbie, American Girl and Fisher-Price, Mattel is desperately looking for a boost from its license to market Star Wars-related cars and vehicles. MAT stock is down 25 percent so far this year, and down an ugly 45 percent in the last two years.
"Mattel is a company coming back from the dark side," said Bruce Kaser, a portfolio manager for Ironwood Investment Management, a registered investment advisor in Boston, and co-manager of the Event-Driven SMID Cap Value portfolio on Covestor, an online investing marketplace.
Kaser says Mattel has been stagnating under "creativity-destroying bureaucracy," but is now under the promising leadership of new CEO Christopher Sinclair and new president Richard Dickson. "The company is on a mission to reinvigorate Mattel's roster of iconic brands," he says. "For the first time, its beloved Hot Wheels brand will join forces with Star Wars to produce a new set of vehicles based on the upcoming Star Wars movie. While all Wheels products, which include Hot Wheels and Matchbox, are just over 11 percent of total Mattel sales, the success of this new initiative could be an early indicator of the potential for the company's future innovations."
3. Electronic Arts Inc. (EA). Electronic Arts signed a 10-year exclusive licensing deal with Disney in 2013 to make Star Wars games -- and with a new trilogy of movies launching in December, EA developers are looking to keep gamers busy.
Much of its short-term hopes are riding on the sixth installment of the "Battlefront" series that is scheduled to be released this year. "Battlefront" is a popular first-person shooter game set in various worlds in the Star Wars galaxy. The new Star Wars movies will include plenty of new worlds and scenarios to explore, and you can be sure Electronic Arts will take advantage of the opportunity, perhaps offering exclusive downloadable content to maximize profits.
EA is hoping to sell as many as 10 million copies of the game, which will be available in November (just in time for the holiday shopping season, of course) on Microsoft's (MSFT) Xbox One, Sony (SNE) PlayStation 4 and on personal computers. EA stock is already up 53 percent for the year, trading near $72 per share.
4. IMAX Corporation (IMAX). In April, the large-screen movie company announced it renewed its multi-picture distribution agreement with Disney through 2017, which will allow it to show "Star Wars: Episode VII -- The Force Awakens" on IMAX's 72-foot wide screens.
Despite a slight downturn in June, IMAX stock is up nearly 20 percent so far this year, and analysts are bullish on the stock going even higher. Of 14 analysts who have initiated coverage of IMAX, four rate it a "strong buy" and six call it a "buy." The company reported earnings in the second quarter of $343 million and has generated more than $500 million in box office sales in the first half of the year.
IMAX operates more than 800 theaters in 57 countries -- more than enough for Star Wars fans to want to see the Millennium Falcon in its full big-screen glory.
5. Hasbro Inc. (HAS). Unlike Mattel stock, Hasbro has been a Wall Street star in 2015, up more than 45 percent and continuing to outperform its 50- and 200-day moving averages. HAS stock has benefited from year-over-year revenue growth for five straight quarters, and the stock still appears to have room to run higher.
Hasbro is licensed to create and sell hundreds of Star Wars-branded games, action figures, electronic toys and puzzles. If you are shopping for Star Wars toys this holiday season, you'll likely consider a Hasbro product at some point.
"Hasbro's brands, particularly its Transformers and Marvel superhero franchises, have been well-suited to TV and movie success. And with the big ramp-up of publicity with the upcoming Star Wars movie, demand looks to be strong for probably several years to come," Sizemore says.
6. Wal-Mart Stores Inc (WMT). The nation's No. 1 retailer, with sales of $343.6 million last year and more than 5,100 stores, expects to be a key shopping place for customers to buy Star Wars toys and video games.
Wal-Mart stock is down a hefty 15 percent so far this year, and the company missed earnings estimates last quarter, but the retailer has always relied on the Christmas shopping season to bolster its bottom line.
One of the biggest challenges for Wal-Mart, of course, is that millennials are showing a greater preference for competitors Target (TGT) and Amazon (AMZN) than for Sam Walton's mega-sized discount empire. Wal-Mart lagged behind both Target and Amazon in e-commerce sales in the last holiday season, and will need to close that gap this winter to maintain its overall retail dominance.
"I'm a holder of Wal-Mart, as part of a generally defensive domestic equity style: holding large cap/category killers/major moat stocks that continually pay and/or grow their dividend," says Thomas Yorke, managing director of Oceanic Capital Management, a registered investment advisor in Red Bank, New Jersey, and a portfolio manager on Covestor. "I would love nothing more than for Luke Skywalker to help my stalwart selection."
7. AMC Entertainment Holdings (AMC). One of the biggest players in the entertainment industry, AMC operates 22 of the 50 highest-grossing theaters in the U.S., and holds the No. 1 or No. 2 market share in each of the nation's top 15 media markets.
And all signs are pointing to AMC playing up the newest Star Wars movie in a big way. Rumors fueled by the fansite Star Wars Action News indicate that AMC is planning to offer a Star Wars movie marathon before the Dec. 18 release of "Star Wars: Episode VII -- The Force Awakens." The theater company had a similar promotion to promote "Avengers: Age of Ultron" by airing a 27-hour marathon of every Marvel movie, so a Star Wars marathon certainly isn't out of the question.
AMC stock is trading 19 percent higher so far this year and is up more than 35 percent in the past 12 months.
8. JAKKS Pacific Inc. (JAKK). The only small-cap stock on the list, with a market capitalization of $233 million, JAKKS Pacific is licensed to create large-scale figurines from the Star Wars world. While it has a somewhat limited collection now, with figures ranging from 18 inches to 31 inches in height, the release of additional Star Wars movies gives JAKK stock an opportunity for long-term growth.
JAKK stock is up 43 percent so far in 2015, trading at nearly $10 per share, with a median price target set by analysts of $10.75.
