Best Stock for 2008: IMAX

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Ring in the new year with more stocks for 2008.

Take a step back and look at the big picture.

I'm not just talking about those ginormous IMAX (Nasdaq: IMAX) screens, the ones that can stretch as high as eight stories tall.

No, I'm talking about IMAX itself. Despite its flaws -- and IMAX certainly has plenty of warts -- the company is perfectly positioned to cash in come 2008.

You may not think so. This is one of the few stocks -- if not the only one -- in this contest kicking off the new year from the unloved single-digit starting line. A share of IMAX can run you less than a ticket to one of its bigger-than-life screenings.

That's not an insult. It's an opportunity.

And now, our feature presentation
Something amazing happened earlier this month: AMC signed a joint venture deal with IMAX that will transform screens at 100 of its largest multiplexes into IMAX experiences. Half of the screens will go up in time for the summer blockbuster season.

These aren't just any IMAX systems. We're talking about the company's nascent digital projection platform. Digital delivery is a big theme with exhibitors. It's much cheaper to deliver Hollywood hits digitally, rather than using costly film prints. This also opens the door to everything from live concerts and sporting events to bonus features added during the theatrical run to ignite repeat viewings.

Companies like AccessIT (Nasdaq: AIXD) and Thomson (NYSE: TMS) have solutions in place for conventional screens. National CineMedia (Nasdaq: NCMI) was formed by several key multiplex operators as a way to milk incremental revenue through a digital advertising network. They're all jockeying for position, but isn't IMAX the one worth watching?

If digital delivery for movie theater chains means more dynamic film experiences, Super Bowls, and once-in-a-lifetime concerts, isn't the sensorial bliss of IMAX the only way to go?

IMAX may watch over just 300 installed screens all over the globe as of last quarter, but this is the kind of deal that changes things. If AMC is committing to it, how can rivals across town like Regal (NYSE: RGC), Carmike Cinemas (Nasdaq: CKEC), and Cinemark (NYSE: CNK) remain competitive without following suit?

Sit back for the Hollywood ending
I recommended IMAX to Motley Fool Rule Breakers subscribers two years ago. My theory at the time was that IMAX was going to revolutionize the film industry and save the corner multiplex in the process.

I may have been too early, but now the pieces are finally in place to save the industry that has suffered through attendance declines in many of the past few years.

What's hurting the exhibitors? Well, you can blame everything from the home-theater revolution to the tightening release window between first-run releases and their eventual DVD debuts.

IMAX raises the stakes. It creates an experience that will never be matched at home. Films are hitting the retail market sooner, but digital delivery opens up opportunities for the same flick to be served up many different ways.

I call stocks like IMAX Category 5 investments, because they're the ones that can really make investors rich by shaking up the landscape like a major windstorm. Nothing rattles the market more than disruptive industries, and if any market can use a little disrupting, it's the moribund exhibitors.

Theaters did it to themselves. The overpriced concessions, the soda-sticky floors, the growing slate of ads and trailers that paying customers must sit through before they see the promised flick -- chains have been asking for it.

IMAX is the best way to win them back. Even a cinematic dud like Polar Express has been a hit in its IMAX transformation. Jaded filmgoers have a hard time bypassing an IMAX release when something new is brought to the table, like IMAX-specific 3-D segments.

With AMC's vote of confidence there for all to see come 2008, the year ahead is going to belong to IMAX. If you see it my way, head on out to CAPS and cast your vote for IMAX to outperform in the year ahead. Then check back in later this week, when we reveal the winner of our Best Stock for 2008.

Failing to do so would be an admission that you're missing the big picture, in more ways than one.