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TMFBomb (89.07)

Thoughts on Marvel

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June 18, 2008 – Comments (4) | RELATED TICKERS: MVL.DL

As a financial editor/sector head at the Fool, I run across a lot of investment ideas from our writers.  One of the more compelling ideas, at least for me, was Marvel.  If you've ever read Tim Beyers' articles on our site, you know he's a big fan (and big shareholder...almost 18% of his portfolio!).

Tim's logic convinced me to buy some shares even after most of it's run-up...I believe I bought them at $33-something.  Here are a few of my quick thoughts:

- With Iron Man (and now The Incredible Hulk), Marvel started producing their own movies...instead of getting licensing fees like they did for Spider-Man et al.  The big question is how much more money will Marvel make now that they're taking on more of the risk?

- In a presentation Marvel did in 2006, it's apparent that the movies are around breakeven when they hit $100 million in domestic box office. 

- I think the big question here is whether Marvel's catalog of characters will support a string of box office behemoths or whether the more minor characters just won't be compelling.  I wasn't a big comic book guy at all growing up, so I have very little feel for this.  I had never heard of Iron Man before the movie came out and thought the Hulk would do much better than Iron Man.

- Iron Man is nearing $300 million domestically and is poised to be a sequel producer on par with Spidey.  That will certainly bode well for Marvel financially. 

- The Incredible Hulk looks like it's just going to be a minor hit.  It cleared $50 million domestically its first weekend, but Iron Man was around $100 million.  If it has a similar trajectory to Iron Man, that means a total of around $150 million domestically by the end of its run.  Not bad, but not the grand slam that investors like me were hoping for.  But before we extrapolate too quickly, we'll have to see how much the dropoff is in week two.

- I like that Marvel is using talent like Jon Favreau, Robert Downey, Jr, and Ed Norton.

- I still haven't seen Iron Man or The Incredible Hulk.  In fact, I chose to watch Don't Mess With the Zohan instead of the Hulk last weekend...I absolutely loved the Zohan...very funny stuff from Adam Sandler. 

Check out some of Tim's articles, which do a much better job than my disjointed blog post:

 Did the Hulk Bomb for Shareholders?

 "Iron Man" Is So Much Bigger Than You Think

 Marvel Is So Money

  

4 Comments – Post Your Own

#1) On June 18, 2008 at 9:11 PM, TMFHelical (99.09) wrote:

You ask a good question, namely how many characters will support blockbusters.  A few more, but not a large number.  Ironically, many of DCs characters might do better in the right movie vehicle.  Flash and Green Lantern have a better shot than Captain America in my opinion (especially with the steroid over-toned backstory of the latter).  But Thor will be large, and some X-men stand alones should do fine as well. 

 They don't all need to be as expensive as an Iron Man or Hulk to produce.

Spiderman still has legs as well (sorry). 

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#2) On June 18, 2008 at 11:25 PM, mmwmmr (98.85) wrote:

I too have had similar concerns with regard to Marvel.  I was thinking about investing in Marvel recently, and while I'm sure it will show some gains in the short term, I'm not sure how much farther its value is going to rise in the long term.

 Essentially, Marvel's focus currently is making movies based on comic book characters that have been around since the 1960's.  People go to see these movies because they recognize characters like Spider-man, the X-Men, and the Incredible Hulk, even if they are not avid readers of Marvel's comics, and they make for fun summer movies.

 However, a value investor looking at Marvel for the long-term has to ask: how long is this going to last?  How long can Marvel make money off of the same characters through sequels and spin-offs?  What happens when Marvel has cashed in all it can on those mainstream characters?  Will those less popular characters still be able to turn a profit when they are put on the big screen?

 I'm not sure, but if I do end up investing in Marvel I'll be keeping a close watch on those 10-Ks, 10-Qs and box office numbers.

  

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#3) On June 19, 2008 at 11:49 AM, Schmacko (53.77) wrote:

The advantage marvel now has over some of the bigger name characters over at Time Warner's DC is that the now have the ability to build a sort of movie universe where characters from one movie can make cameos in the others and sort of cross promote themselves.  Captain America and Thor will continue the trend leading up to the Avengers Movie.  The original Avengers being founded by Captain America, Thor, Iron Man and the Hulk.

I'm probably more worried about how well a captian america movie will do than a Tohr movie, but it really all depends on how well the writers reinvent/update the characters histories.

On the stock side I would expect DVD, toy, and video game sales to keep the stock chuggin through the first quarter of FY09.  Everyone seems to be thinking new Marvel movies don't come out til 2010, but in actuality X-Men:Origins Wolverine starring Hugh Jackman is currently scheduled to be released in May of '09.  I thik this is under a production deal with Fox so it's not 100% in house but I'm sure it will spin off toys and video games as well keeping licensing revenue flowing in and interest in Marvel piqued.

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#4) On June 20, 2008 at 1:11 PM, TMFBomb (89.07) wrote:

Nice one-liner, HelicalZz.

mmwmmr...good point on the longevity of the characters.  In the next few years, Marvel can still rely on its main characters and plenty of sequels...but after that, I do worry.  For me, this isn't a set and forget stock like buying Coca-Cola.  It's a fret and re-analyze with each piece of major news type of stock.  I'll be really curious to see how their profitability changes now that they're producing their own movies, and I'll be attentive to their upcoming movie schedule.  I guess this type of risk is the peril of entertainment stocks that rely on creative talents and the fickle public.

Schmacko...good points on the rest of the business...I've been focusing my comments on just the self-produced movies b/c that is what's new, incremental, and still a little unknown...always good to remember that there's more moving parts.

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