My fellow Marvel Enterprises (NYSE: MVL ) shareholders -- how have you been feeling lately? A bit ill, perhaps? Motion sickness setting in from all the ups and downs?
OK, I'm exaggerating. It probably hasn't been that volatile a ride for the company's stock. Nevertheless, the equity's price movement over the past several weeks has been fun to watch, especially as the Fantastic Four movie draws nearer. This is Fox and Marvel's big summer film, and I dearly pray it doesn't disappoint (as, unfortunately, Elektraeventually did).
Let's face it -- if Fantastic Four performs heroically at the box office, beating any perceived expectations, the price of Marvel's stock will almost certainly soar. If the film derails like a train wreck, then the price will probably dive like a sub. But fascinatingly enough, even before the film has opened, there's already been some action in the price.
In theory, a stock's movement should represent the conventional wisdom of truly "smart money" -- clued-in investors with some sort of vital information to help predict the outcome of a crucial event. Take a look at this one-year chart -- it screams "trading vehicle" in many ways. Not necessarily pretty like a parabola, huh? Still, Marvel seemed headed upward for a while; I'd hoped it might indicate an informed feeling in the marketplace that Fantastic Four possessed strong potential.
But take a look at this one-month chart; we see a bit of resistance, followed by a slight downturn. This reverse course can more easily be seen in the following 10-day chart. What's a Marvel shareholder to think now? Is the market predicting disaster for the Four?
Probably not. As with nearly every movie, we won't know the Four's fate until we get those initial box-office statistics. Investors shouldn't necessarily assume that volatility in a stock like Marvel's is a thumbs-up or thumbs-down for the picture.
If Marvel is on your current wish list, should you buy right before the opening of Fantastic Four? I'm very fond of the company's future prospects, considering that more helpings of X-Men and Spider-Man are coming up in the next few years. Even now, buying isn't something I'm set against. But I'd recommend buying only a small initial stake and keeping some cash on hand for the days after the new franchise's opening -- assuming it does become a franchise.
It's entirely possible that better prices are on the way. And if they don't materialize . well, remember, Marvel works best as a long-term investment. There are a lot of traders and short-sellers out there who work the stock over. It's best to just average in over time, improving your cost basis when you can. Shareholders of Pixar (Nasdaq: PIXR ) and DreamWorks Animation (NYSE: DWA ) put up with the same thing, as Seth Jayson recently discussed.
I'll tell you one thing, though -- if Fantastic Four by any chance beats Tom Cruise's War of the Worlds, even with that film's better release date, I'll be the one jumping on my sofa like a screaming maniac.
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