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MarkReeth (62.33)

Would You Rather Invest in Wayne Enterprises or Stark Industries?

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February 10, 2012 – Comments (7)

With summer fast approaching two movies have begun to ramp up advertising; The Dark Knight Rises and The Avengers.  Each movie has a protagonist with one power greater than any other in their arsenal; a vast personal fortune gained through business empires.  Batman, aka Bruce Wayne, has Wayne Enterprises, while Iron Man, aka Tony Stark, has Stark Industries. Unfortunate though it may be, both these companies are part of a fictional universe that only comes to life in comic books and movies.  But what if that wasn’t the case?  What if both companies existed in the real world, and could be invested in just like any other stock listed on Fool.com?  Most importantly, what would a blog post detailing the pros and cons of each company look like?  Let’s find out.

 

Histories and Profiles

Over time Wayne Enterprises (ticker symbol BAT) has grown substantially from its humble origins as a merchant house in a small town called Gotham, and is today one of the largest corporations in the world.  What the company lacks in original names it has made up for with profits from branches such as Wayne Technologies, Wayne Chemicals & Pharmaceuticals, and Wayne Aerospace. All the branches of the company have combined to make BAT “the forerunner in many fields of technology,” and competitive with other industrial juggernauts such as GE and LexCorp.  Wayne Enterprises employs over 15,000 people around the world and is by far the biggest employer in Gotham.  Unfortunately the company’s loyalty to the city it helped build has proven to be a heavy burden. 

During the recent economic downturn Wayne Enterprises publicly swore not to fire a single employee, a promise it has managed to keep at a high price.  Because the company has not been able to cut costs through downsizing employees, margins have shrunk drastically and branches of Wayne Enterprises are showing losses for the first time in decades.  As the world and the US recover, however, so too does Wayne Enterprises.  In a twist of fate, with Europe’s future cloudy at best and the slowing growth in emerging markets, Wayne Enterprises’ focus on business in the US has positioned the company for continued success in coming years. 

Stark Industries as we know it today has its roots in the mid-19th century when Isaac Stark created innovative security measures for a new industrial age.  With his products selling quite successfully, Stark used the proceeds of his sales to found Stark Industries.  Over the years the company has expanded, becoming a leader in munitions development as well as other fields including “aeronautics, robotics, micro-technology and fringe science.”  Control of the company is now in the hands of Isaac’s grandson, Anthony. 

While under Tony Stark’s control Stark Industries (ticker symbol SIA) has reached new heights in both profits and scientific development; however, SIA has suffered a series of recent and drastic setbacks due to management problems.  The first was Tony Stark’s brazen announcement that his company would no longer produce munitions, by far the most lucrative sector of Stark Industries.  Stark Industries’ stock price tanked overnight, and the board of directors quickly drummed Tony out of the company and replaced him with Obadiah Stane.  However, after Stane’s tragic death Tony was brought back in as CEO on the condition that Stark Industries continue to produce munitions.  Stark Industries has done so quite successfully, recently securing a contract with the military organization S.H.I.E.L.D to provide all ordnance and equipment.

With Tony Stark at the helm once more Stark Industries has expanded even during the economic downturn.  This is mainly due to the diversity of Stark Industries’ clientele and production facilities, both of which span the globe.  There is at least one Stark Industries manufacturing plant in thirty countries around the world and on all seven continents, and it’s this diversity that has benefitted the company and allowed it to maximize profits in emerging markets while containing losses in more developed countries.  However, as growth in emerging markets slows and the future of the European Union becomes more and more uncertain, fears have arisen that Stark Industries must adjust their business model accordingly or suffer profit loss. 

Leadership

Let’s be honest here; no one really wins this portion.  After the death of Thomas Wayne, an excellent CEO if ever there was one, the position was passed on to his son, Bruce.  Since his appointment Bruce Wayne has done seemingly everything in his power to avoid the responsibilities he inherited and instead has chosen to focus on life as a billionaire playboy and all the hardships that come with that lifestyle.  Clearly the burden of running a multi-billion dollar company has caused Mr. Wayne many sleepless nights, as he was heard snoring during the last earnings call. 

Although we may never know how Mr. Wayne spends his evenings, it would seem that he possesses at least a modicum of business acumen; Wayne has appointed Lucius Fox as CEO of Wayne Enterprises.  Mr. Fox has a sterling reputation as a gentleman and businessman, and has produced quite the track record of success during the last few years in his tenure as CEO.  Under his guidance Wayne Enterprises has successfully weathered the recent economic downturn and is poised to grow over the next few years. 

It would seem that Tony Stark and Bruce Wayne are two sides of the same coin.  Like Wayne, Stark appears to have little interest in the company he inherited, though his reasons are more apparent than Mr. Wayne’s; Stark’s startling revelation at a press conference in 2008 that he is the vigilante Iron Man sent shockwaves through the financial industry that are still felt today.  Since then it appears that Mr. Stark has blossomed in his role as the iron-clad hero while apparently taking no interest in the company his father built.  And let us not forget Mr. Stark’s constant battle with alcoholism, a battle which has appeared quite thoroughly lost throughout the years. 

Business Prospects

One branch of Wayne Enterprises that has lagged badly this year is Wayne Oil.  With the decline in natural gas prices came a decline in Wayne Oil profits, though the large numbers of oil and gas fields controlled by the company have continued to produce well, despite Wayne Oil’s refusal to engage in fracking due to environmental concerns.  However there are several bright spots on Wayne Oil’s horizon, the biggest of which is the creation of a power generator that runs on naturally growing algae.  Though the mass production of this generator is still many years away, the announcement alone boosted Wayne Enterprise’s stock price, and with a drastic head start on the competition this new technology will almost certainly prove to be a profitable product for Wayne Enterprises in the coming years. 

For decades BAT has had very large and lucrative contracts with the US military as a supplier of everything from fighter jets to aircraft carriers.  However as President Obama has made it clear that he intends to cut military spending and decrease the size of the military overall, it has been made just as clear that portions of Wayne Enterprises will suffer as a result.  Wayne Aerospace has already cut earnings estimates due to the dissolution of NASA’s manned spaceflight mission, and will continue to suffer as the Air Force reduces spending.  Wayne Electronics loses out as well considering it will no longer need to produce its large line of products associated with the military industry, specifically its Brother Eye line of satellites.  And as the US Navy cuts spending, it will almost certainly let the large contracts it has with Wayne Steel & Shipbuilding expire. 

Meanwhile over at Stark Industries business is literally booming.  The flagship of the Stark business empire, Stark Industries has consistently raked in profits over the years thanks to a vast number of contracts with various defense departments around the world.  Their biggest customer, the US government, continues to demand Stark technology and Stark Industries is only too happy to oblige with developments such as Jet-Powered Roller Skates, Atomic Naval Cannons, and Mangler Missiles. 

Many investors worry that as the US government cuts funding to the Department of Defense, Stark Industries will suffer losses in profits.  What these investors forget is that bigger isn’t always better, a lesson that Stark Industries has learned seemingly quicker than its competitors.  As the Department of Defense cuts funding to larger projects it shifts its focuses to more refined and precise means of defense.  This works well for Stark Industries, which creates a variety of products appropriate to a more surgical style of warfare; this includes the new Hulkbuster armored suits, based off of Tony Stark’s coveted Iron Man technology, which have been sold to the Department of Defense for $6.2 billion dollars.  Therefore there’s nothing to fear from reduced defense department spending; in fact if anything it is an advantage for Stark Industries considering the company produces some of the most effective and precise military technology in the world.

Fool Pitches 

But what do my fellow Fools think of these two companies?  HAJoker666 seems to think this is all one big joke, claiming in his pitch that Wayne Enterprises is run by someone called “Batman” (you could at least come up with an original name buddy).  I don’t really know what to make of 2FaCe’s pitch; it seems like half of him approves of Wayne Enterprises while the other half believes the company is going down the drain.  Meanwhile SPDRSenses gives Stark Industries an ‘Outperform’ rating with the comment “With great power comes great profitability.”  And CaptUSA believes SIA should focus on increasing its presence in the United States. 

Final Call 

No matter which company you believe will come out ahead, you can’t deny that it’s going to be a close contest.  With Wayne Enterprises ranked Number 11 on Forbes’ 25 Largest Companies and Stark Industries at Number 16, both companies are clearly profitable and have records of success.  What remains to be seen is if both of these companies can continue their winning streaks.  Wayne Enterprises has a lot of ground to take back after its losses this year, but with new technologies being developed at a blistering pace there can be little doubt that BAT will recover just fine.  Meanwhile Stark Industries has grown while others have shrunk over the last couple of years, but now the company needs to prove it hasn’t overextended itself and can retain the profits it has made. 

Tune in next week when I examine pharmaceutical giant Umbrella Corp and the recent breakthroughs it has made at its Raccoon City lab.  Also, we’ll see whether or not Oceanic Airlines can get past its shaky safety record to achieve profitability.  Finally, we’ll take a look at Cyberdyne Systems Corp and their newest product SkyNet; will it be the US Department of Defenses’ newest weapon in cyberwarfare?  Come back next week to find out.

 

Disclosure: I do not own any positions in BAT or SIA

 

 

Author’s Note: They say to write what you know about, and I know comics and investing.  I hope you enjoyed reading this as much as I enjoyed writing it.  Invest Wisely, Live Foolishly

7 Comments – Post Your Own

#1) On February 10, 2012 at 11:06 AM, lemoneater (78.14) wrote:

I suspect that Catwoman now controls the board at Wayne Enterprises. She is very good at manipulating people and gaining consensus. While I applaud her new clothing line--perfect for the "woman on the go," I'm unhappy at the scope of her influence since her approach seems to emphasize short term gains over long term planning. 

Also the fact that secret meetings are held in a purported bat cave does not reassure me. I do not like to invest in companies which demonstrate such a chronic lack of tranparency.

I do not know very much about Stark Industries, but I suspect the CEO of being a meglomaniac. However since that is a common characteristic of CEOs I would need to know more about the company before making a final decision.

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#2) On February 10, 2012 at 12:25 PM, Mega (99.96) wrote:

Isn't Wayne Enterprises more into technology and medical?  And Stark also has large investments in real estate in addition to weapons.  A bit like Corning - if it had kept Quest Diagnostics and other joint ventures and spinoff - versus Honeywell + Howard Hughes Corp.

I would pick Wayne, both these majority owners seem a bit deranged so I would go with the one who is more hands-off.

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#3) On February 10, 2012 at 3:31 PM, Mega (99.96) wrote:

In the next installment I suggest comparing SPECTRE and Halliburton.

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#4) On February 10, 2012 at 3:59 PM, CCharing (89.77) wrote:

"There is at least one Stark Industries manufacturing plant in thirty countries around the world and on all seven continents, "

So why did he build a plant in Antarctica? 

 

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#5) On February 10, 2012 at 4:06 PM, CluckChicken (27.79) wrote:

 

I would have to go with Stark Industries based on the fact that they have a large contract with a government agency that seems to only deal with super villain threats, to me this sounds like a blank check to make experimental equipment.

 

I must say Wayne Enterprises is highly efficient given that it competes with the likes of GE on a global bases with 15,000 employees.  Also Gotham is a much smaller city than it appears or an amazingly diverse city, if Wayne is the major employer.

 

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#6) On February 10, 2012 at 9:17 PM, MarkReeth (62.33) wrote:

Hello all!  Thanks for the great comments!  

CCharing: I suppose stark has a bunker in Antarctica for the same reason superman has a fortress of solitude in the arctic; privacy.  Some things stark creates are so dangerous and secret that the only place they can be produced is in Antarctica.

CluckChicken: Wayne enterprises is definitely a large and efficient company, thanks to the most excellent Lucius fox.  As for Gotham, while it remains a major city the population of the city has been decimated by the tragic events outlined in the Batman comic arcs Contagion, Legacy, Cataclysm, and No Mans Land.  I'm sure I speak for every Fool when I say that our hearts go out to the residents of Gotham.  

Also, fun fact; according to the DC atlas Gotham is located in southern New Jersey. 

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#7) On February 11, 2012 at 12:49 AM, Melaschasm (55.51) wrote:

Wayne enterprises sounds more like investing in a mature dividend payer, while Stark sounds like investing in Apple.  The question is whether you are investing in Apple right when it launched itunes/ipod, or if you are investing right before Steve Jobs quit and the company went into a long decline?

With my real life money I tend towards the safer investment (BAT).  With my CAPS pics I tend more towards STARK because I am experimenting with my ability to outsmart the market.

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