Entertainment Stocks - Best Movie Stocks to Buy

Friday, December 13, 2019 | Matthew Sweeney
Entertainment Stocks - Best Movie Stocks to Buy

Entertainment stocks are issued by companies in the entertainment business who produce and distribute movies, television shows, music, and printed media. Some entertainment companies, like Disney, also operate amusement parks and themed tourist destinations. These billion-dollar entertainment companies can be good investments for long term success in the stock market.

Top Entertainment Companies in the World

Entertainment Industry

The entertainment industry is a relatively recent addition to the market, especially in comparison to verticals like food and manufacturing. Entertainment, of course, has existed since the proverbial dawn of time—mankind has almost always been producing music, telling stories, and seeking self-expression through the arts.

But by and large, entertainment was not part of daily life, and it certainly wasn’t monetized through a business model. With the advent of the industrial revolution, life became easier and people had more leisure time. The end result meant more pursuits of pleasure, such as entertainment through a rapidly expanding publishing industry.

It still would be some time, however, before the entertainment business took off. What really opened up its potential was the invention of the radio, which created opportunities for live programming. Now stories could come to life with sound effects, music, and voiceovers. People around the world tuned in to be entertained.

Further inventions only increased the power of the entertainment industry, creating new opportunities for enterprising individuals to leverage the power of technology and create a name for themselves through establishing movie studios.

When television came around, the existing corporations that had already tapped into the mass media power of radio leveraged this new tool for getting right into the living room of consumers. Just a few decades after television, the internet, social media, mobile devices, and 4k televisions have created new opportunities for the entertainment industry to become an all-consuming part of daily life.

Where entertainment goes next no one knows for sure—but pundits believe that virtual reality and 5G might be the next frontier. Entertainment and communication giants tend to be slow-moving beasts on Wall Street, so these future trends don’t appear to have much impact on their prices—at least, not nearly as much as the overall market does. That said, traders looking to capitalize on the most active stocks might consider looking into some of the secondary players, such as technology stocks issued by companies that make the equipment behind the scenes.

Top Entertainment Companies in the World

These are the entertainment companies that make us laugh, make us cry, and make billion-dollar returns doing it all. If you’re investing in the entertainment business, these are the top businesses to watch.

Disney (NYSE: DIS) is a multi-faced entertainment company. It’s so large and impactful, the company is practically synonymous with American culture. Most consumers of Disney movies, TV shows, and theme park entertainment don’t often think about its humble beginnings as a small animation studio headed by Walt Disney in Southern California. There was something charming and rightly-timed about a little cartoon character named Mickey Mouse, who quickly became a cultural fixture and synonymous with new technology like cinematic sound.

In 1937, Disney continued to pioneer the way in entertainment with the first full-length animated feature film, Snow White. Disney’s animated films in the following decades have become cinematic staples. In the 1950s, the company built a theme park in Southern California: Disneyland. Visitors to any one of the Disney theme parks around the world—in Florida, China, Japan, and France—are immersed in a uniquely imaginative experience, one that generated $4.5 billion in profit in 2018. Even after the passing of Walt Disney, Disney continues to grow as the biggest name in entertainment. It has expanded through acquisition in diverse sectors of the entertainment industry, such as Lucasfilm, Marvel, Pixar, ESPN, ABC, and select assets of 21st Century Fox.

Time Warner Cable was acquired by Charter Communications (NASDAQ: CHTR) in 2016 in an $80 billion deal, making it the third-largest pay-TV service in the US and the fifth-largest phone company. Charter has since renamed the cable service to Spectrum.

AT&T (NYSE: T) acquired Time Warner Inc. in 2018. Comcast had previously tried to acquire Time Warner in 2014, but the deal was blocked by various groups, including the US government. Through various corporate relationships, Warner Media has had a hand in MTV, VH1, Nickelodeon, DC Comics, Mad Magazine, and Warner Brothers—one of the founding fathers of Hollywood since 1923.

A 2000 merger between AOL and Time Warner was supposed to be the deal of the century. The theory was that Time Warner’s monumental content output would be channeled directly to consumers through the new technology of the internet. Unfortunately, AOL’s dial-up internet model became a thing of the past, replaced by broadband competitors. AOL Time Warner filed losses of almost $100 billion in 2002, and after some corporate restructuring, dropped AOL from its name in 2004. Although the merger has been called “the biggest corporate mistake in history.”

CBS, or the Columbia Broadcasting System, is part of Viacom (NYSE: CBS), a mass-media company based in New York City that produces and distributes movies, television, printed materials (books and magazines), other forms of digital media. Viacom’s flagship assets are Paramount Pictures (the second-oldest film studio in Hollywood), CBS networks, and domestic channels like Nickelodeon, MTV, BET, Comedy Central, and Showtime. In fact, Viacom operates around 170 networks international and regional, with a whopping 700 million subscribers.

Viacom itself was actually formed as a spinoff entity of CBS in the 1950s. CBS was a longstanding player in the entertainment and news industry, going back all the way to the days of radio when it was founded in the 1920s. The network fought hard to create an image of believability against the skepticism of this new medium (radio) and became the first radio news network, connecting Americans to unfolding events as they were happening—a first in media that we take for granted. As radio gave way to monochrome TV, which in turn gave way to color TV, CBS was right at the vanguard, providing quality content and becoming a household name.

Founded in 1920, AMC Theatres (NYSE: AMC) is the largest movie theatre chain in the world, operating 661 movie theatres in the United States and 244 in Europe. AMC was the first company in America to open a multi-screen theatre in the 1960s, when the company realized it could run two theatres at the same time with the same amount of staff. Over the next several decades AMC saw sizeable expansion, and in the 1980s they innovated again by opening the first American cinematic megaplex in Texas, a 24-screen theatre that could accommodate thousands of viewers at one time. AMC has grown in part through acquiring or merging with other movie theatre companies, most noticeably Loews. AMC has experienced strong revenue growth since 2012, reporting $5.4 billion in profits in 2018.

Comcast (NASDAQ: CMCSA) is the world’s second-largest cable and broadcasting company in terms of revenue, and the largest in the United States—not to mention the largest domestic internet service provider. Since 2011, Comcast has also owned NBC, which provides content in the form of movies and television.

Comcast has been criticized for having the lowest customer satisfaction ratings in the industry and violating net neutrality. The company has also weathered antitrust concerns since it owns both content production (NBC) and the means of distributing the content. Even so, Comcast’s common stock has grown in value in the last five years, while still retaining a very reasonable PE ratio. Comcast has expanded through some aggressive acquisitions and mergers, some of which have been unwelcome and rebuffed—like their $54 billion bid to take over the Walt Disney Company, which Disney rejected. If that deal had gone through, Comcast would have been the largest media company in the world.

Sony Corporation (NYSE: SNE) is a Japanese corporation with a hand in gaming, entertainment, hardware, and even financial services. As an indicator of its versatility, Sony is the fifth-largest television maker in the world, the brand behind gaming console PlayStation, and the parent company of the world’s second-largest record label.

Sony Pictures Entertainment, which acquired Columbia Pictures in 1989, has produced many memorable films, such as Men in Black, Karate Kid, and Spiderman—not to mention televised staples like Wheel of Fortune and Jeopardy. Sony actually started out after WWII as an electronics shop with eight employees. The company built the first tape recorder in Japan, and their first branded product was a radio, which opened the door for Sony for a large US market of consumers. Today, Sony ranks 97th on the global Fortune 500.

Tencent (SEHK: 700) is a Chinese multifaceted conglomerate involved in internet services, entertainment, and the development of artificial intelligence, both in China and worldwide. Tencent is actually the world’s largest gaming provider, and is the company behind massively multiplayer online games like Call of Duty, League of Legends and (partially) Fortnite, in addition to their recent development of gaming hardware.

Tencent is also an Asian film and entertainment behemoth and owns the majority of China’s music industry. It’s the first Asian company to pass the $500 billion mark in terms of value, and is believed to have the 5th most valuable brand value in the world. Not content to develop their own business, Tencent is one of the most involved corporate investors in the world, with sizeable shares in 600 businesses (mostly in the startup tech space). Tencent is just one example of Chinese companies emerging onto the global scene, some of which might be among the best growth stocks.

Entertainment ETF

The entertainment industry is not as diverse and confusing as some startup sectors, such as biotech and AI—which have some industry stocks that are the biggest stock gainers, while others only result in dashed hopes. By contrast, there are some clear winners in the entertainment industry that have made firm gains. With the entertainment industry, you won’t have to comb through the earnings per share or other stats listed on online brokerages (though it’s not a bad idea) because you probably already recognize the names.

There are a few key players that everyone knows. These companies have been in business for a long time, solidifying their cash flow. Still, it’s possible for things to go wrong, especially because entertainment is still technically a consumer discretionary and not a staple. Moreover, it’s not impervious to mistakes: just think about Time Warner and AOL. Remember, even the best investing ideas carry a certain amount of risk, and if you don’t have mechanisms for balancing that out, you’ll share in a company’s ups...and downs.

That said, instead of picking and choosing which stocks to buy in the entertainment business, you might consider buying shares of an exchange-traded fund. It’s like a mutual fund with diversified holdings, but you can buy and sell shares, just like a stock.

The Roundhill Bitkraft Esports & Digital Entertainment ETF (NERD) focuses on 25 companies in the gaming sector, an industry with 2.5 billion active players. The Communication Services Select Sector SPDR Fund (XLC) focuses on large cap companies in communication and entertainment such as AT&T, Comcast, Disney, and Netflix. If you want to focus on US companies, the iShares Evolved U.S. Media and Entertainment ETF (IEME) might be for you. It’s similar to the SPDR, but more diversified—while the SPDR has 26 holdings, the IEME has 85.

Should I Invest in Entertainment Stocks?

If you’re looking to buy stock in the entertainment industry, incorporating some of the top entertainment stocks could be the right move. Entertainment stocks might not be as volatile as oil stocks, but they’re not always as stable as, say, stocks in the grocery or energy business. That said, the biggest players in the entertainment industry are good investment choices because they’ve been around for a long time. These media giants have an established, successful business model, generally low amounts of debt, and the ability to respond to consumer trends and pivot towards success.

Even better, many of them, such as the Disney Company, pay dividends. If a dividend investing strategy is not your goal, entertainment stocks can still be a good buy for growing the value of your portfolio, or even for day trading, assuming you can find the right company. There’s no business like show business...and it makes a great addition to your stock portfolio, whether you’re looking to trade or buy long term.

7 Stocks That Would Make Great Graduation Gifts

Graduations are often seen as an ending. But they also have the potential to be an exciting new beginning. We may be biased, but we believe an ideal way to launch your graduate into the world is by helping them begin their investing education. And one way to help them do that is by having them invest in what they know.

This current crop of graduates has never lived in a world without things like iPhones, the internet, and they were the generation that likely had smartphones when they were in high school. This is a generation that has embraced and demanded relentless technological innovation. And they have rewarded the companies that have delivered.

Now it’s time to reward them, and maybe yourself as well. In this special presentation, we’ll take a look at seven stocks that would make ideal graduation gifts. Each of these stocks has a lesson(s) for graduates to take throughout their lives and careers.

View the "7 Stocks That Would Make Great Graduation Gifts".

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
The Walt Disney (DIS)2.5$177.79-3.1%N/A291.46Buy$209.74
Charter Communications (CHTR)2.4$752.50-1.4%N/A38.89Buy$814.16
AT&T (T)2.4$27.09-1.6%7.68%-87.38Hold$31.06
CBS (CBS)2.6$0.00-100.0%7.86N/AN/A
AMC Entertainment (AMC)1.4$39.77-10.0%N/A-2.37Sell$5.75
Comcast (CMCSA)2.9$56.12-1.7%1.78%20.94Buy$65.07
Sony (SNE)1.4$110.70-1.4%0.37%15.86HoldN/A
Tencent (TCEHY)2.6$58.90+1.1%0.31%20.03Hold$177.61
Roundhill BITKRAFT Esports & Digital Entertainment ETF (NERD)0.6$25.86-3.9%1.24%N/AN/AN/A
iShares Evolved U.S. Media and Entertainment ETF (IEME)0.5$36.78-0.2%N/AN/AN/AN/A
Communication Services Select Sector SPDR Fund (XLC)0.5$80.85-2.8%0.62%N/AN/AN/A
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