Picking Stocks for 2014 Based on Amazon's Best Sellers

Once again Amazon had a record holiday season and, as usual, the company announced its best sellers. Which publicly traded companies in addition to Amazon benefited from this list?

Jan 12, 2014 at 11:00AM

Millions refused to brave the malls and instead shopped online with Amazon (NASDAQ:AMZN), which made for another banner year for the e-tailer.

Some products, in particular, flew off Amazon's fulfillment shelves over the Black Friday-Cyber Monday period. Amazon's annual attaboy press release gives important clues to which companies may report bright-and-shiny earnings in the new year.

All fun and games
Obviously, media, games, and toys are hot every holiday season. This holiday season's big winners were -- no big surprise here -- Microsoft and its Xbox One as well as Sony's Playstation 4. At the peak of sales, orders came in at 1,000 units per minute. 

What's more telling is how game companies fared.

Of actual games purchased, Call of Duty: Ghosts by Activision Blizzard (NASDAQ: ATVI) and Grand Theft Auto V by Take-Two Interactive were big sellers.

Activision Call Of Duty

Call of Duty still source: Activision web site.

Actual games aside, for investors Activision is a better gaming stock than competitor Take-Two (with its negative earnings) or Electronic Arts (which has a trailing earnings multiple of 31 compared to Activision's 17.12 trailing multiple and yield of 1.10%). Call of Duty: Ghosts has been a big hit since its November release; it is the No. 1 multiplayer game for Xbox and PS4 in terms of retail sales.

Elsewhere on the fun front, toys were flying off the virtual shelves. Amazon says it sold more than five toys per second... just on mobile devices.

For investors, Mattel (NASDAQ:MAT) might be the best play here. Its yield is 3.1%, and it trades at a trailing earnings multiple of 19.66.

On Dec. 26, a Zacks' analyst wrote "the turnaround of Barbie -- the company's powerhouse brand in the third quarter was noteworthy. We believe, Mattel's solid product line-up, strategic association with entertainment companies and expansion into the emerging markets will bode well for future growth." For more about Mattel's entertainment associations, click here

Harkening back to Amazon's roots, books -- one series in particular -- had a big holiday season. The enormity of sales of books in the Divergent series -- Divergent, Insurgent, Allegiant, and the complete box set -- was described by Amazon as enough "to wrap around Chicago's Pier Park Ferris Wheel 263 times." Assume that means these books sold a lot.

The big beneficiary here is Lions Gate Entertainment (NYSE:LGF), which will release the first in its Divergent movie franchise soon. The book buying bonanza -- generating plenty of pre-release buzz -- hints at Hunger Games-like success for this franchise.



Lions Gate is a special situation as it has been a momentum name since the first Hunger Games movie in 2012. It is a huge content provider with a video library of more than 15,000 titles. Along with dystopian teen franchises, Lions Gate also owns the Tyler Perry opus and popular horror franchises like Saw.

The company distributes six to seven feature films annually with Roadside Attractions, in which it holds a 43% stake, and another six to eight films per year aimed at U.S. Latinos through a partnership with Televisa. Lions Gate is entering into more distribution and production collaborations like its Netflix partnership on Orange Is The New Black.

The company has reduced its debt by $277.8 million and announced it will pay a quarterly dividend of $0.05 per share, and it now yields 0.60%. For the second year straight Lions Gate is the only independent studio of its size to book over $2 billion annually.

The ultimate holiday 2013 winner...
Despite problems with UPS and FedEx deliveries, the big winner was Amazon itself, recording its best holiday season ever. Of course, they say that every year, which only helps solidify the everything e-tailer's place in the retail world.

Amazon reported more signups for its Prime memberships -- the portal to its Amazon content and e-tail ecosystem -- with more than a million memberships sold in the week before Christmas alone. Every second on Cyber Monday Amazon sold 426 items, setting a record for the e-tailer.

One of its annual Holiday Fun facts revealed, "Amazon.com shipped enough items with Prime this holiday to deliver at least one gift to every household in America." Prime has always been vulnerable to bear-thesis thinking but this holiday season it looks like that thesis eroded.

Another part of the bear thesis was that Amazon wasn't selling enough Kindle devices to make a profit. Bears saw the Kindle as basically a loss leader to get people on Prime.  The company, ever coy with actual numbers, did say that millions unwrapped Kindle devices for the holiday and that it was the best year ever for the same.

Amazon also has the highest trailing earnings multiple of these names. If I've typed that once, I've typed it a hundred times. Only the actual number changes... now it's a stunning 1,404.89.

So which stocks have upside?

MAT Total Return Price Chart

MAT Total Return Price data by YCharts.

The value investor will look first to Mattel. Growth investors may look to Lions Gate, which still has two more Hunger Games installments through 2015 and looks to be in stronger financial shape than ever. Activision is reasonably priced with a yield and Call of Duty: Ghosts may improve the top and bottom lines.

Amazon is always a leap of faith but again it has had a great holiday and it has been increasing the size of its media and book title selection and adding original content.

Christmas 2014 comes early for investors ready to dive in

There’s a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard, Amazon.com, Mattel, Netflix, and Take-Two Interactive. The Motley Fool owns shares of Activision Blizzard, Amazon.com, Microsoft, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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