Cinemark Holdings, Inc. (CNK)

You have to remember that theaters are profitable at around 25% occupancy. The big problem historically has been that they stay empty most of the week, fill up on the weekends and have to turn people away from blockbusters. All of these problems are a result of the expense of making and transporting prints, which limit the manager's programming flexibility because the studios, who pay for the prints, will only send so many to each theater.

Transition to digital projectors in 2009-20011 will do for exhibitors what magically expanding/contracting airplanes would do for airlines. Managers will be able to expand and contract screens depending on demand, and fill up otherwise off nights with alternative content (sports, concerts, etc.) They'll be able to experiment with films that suit local tastes with very little risk, and cater to niche markets. If a digital print of a Chinese language film costs next to nothing and a manager has a big Chinese community nearby, why not experiment on off nights? This kind of flexibility is completely new and exciting to theater managers.

Then there is the new generation 3D. Even if it turns out to be a flop (which most people who have seen it think it will not), attendance will spike for a few years following their installation. All 300 million of us are going to want to experience it at least once.

The amount of leverage these companies have means that it doesn't take too much extra profit to move their share price. CNK also has about 25% of its theaters in Latin America, where the middle class is growing very quickly, competition is less fierce and they get a certain amount of dollar hedge.

The final thing that they have going for them is the huge moat. There was a period of over expansion starting in the 90s, but nowdays, it is very hard to find space to build a new theater in any of the important markets. They have some of the best real estate in the country.

It may take a year or two, but with a 5% dividend, we can afford to wait.