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Marvel Enterprises
New Marvel Hero: Cashman

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By netman622
August 11, 2004

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Many Marvel investors have been beaten down by the beating our stock shares have absorbed this summer. I was frustrated by the "sideways" trading that Marvel had been on from November '03, through June '04. That was simply the prelude for the bloodbath that we've seen the last 6 weeks. I'm not the only one who has waited for management to step in and reverse this trend. As most know, I have been a supporter of management and the decisions that have been made the last 3 years. Some have even called me a cheerleader. Perhaps I have been. While I currently question why management has not done more to protect our share value, I am still sold on Marvel's business model. How about some questions and observations:

What about Profit & earnings? So far, 2004 has been a great year. We have beaten guidance. Without digging up (clipping & pasting) the specific numbers Marvel has had a great '04. The only thing that has made the numbers look bad is the tax liability. We went from paying little to no taxes in '03 to giving Uncle Sam nearly 40% of our profits--ouch!! This has been the basis for Reuters and other news-rags to day that profits are down. By the way, if we can make so much money when we had what some want to call a bad year (Hulk bashing), what will happen when we hit the rest of '04 and '05? What will happen when we hit '05 and we can compare earnings with '04--both will be fair comparisons on paying taxes on earnings? What will happen in '05 and beyond when we get a fair payback from Sony relating to Spiderman 2 (Marvel is now in control of the books!!)? What will happen to earnings numbers when we do not have debt to factor in? It appears that we will make more $$$.

What about '05? Many are saying that since management has not given guidance for '05, we are in trouble. While I wish management would show some boldness and be less conservative, we will get '05 guidance, and it will be good. Having said that, it will still tend to be conservative, but it will allow us to beat numbers. How can I say that? SPIDERMAN 2! Much of the revenue from Spiderman 2 will be layered into 2005. Spiderman 2 will give birth to a new hero--Cashman. We will generate tons of cash from the movie, DVDs, and other licensed items. 2005 will also have Elektra and Fantastic 4. Both will provide power for Cashman to fight Marvel's foes. Marvel expects to continue to grow the international market.

What about the "short" issue? That has been troublesome. I attribute most of our losses to a concerted short attack. We have a $2 billion company (Marvel's market cap) being attacked by a $2 billion short hedge fund. With dishonest reporting and news releases (written by short fund writers!) the battle has been dragging Marvel down. As a matter of fact our current short interest (July 15) is over 15.7 million shares. An all time high. The only thing that can beat such massive opposition is Cashman. As Marvel continues to show that their business model is solid, the stock will have to rebound. As Marvel continues to bring in mountains of cash and as they repurchase shares the price will go back up. We have time on our hands. I believe that is the attitude of management. While they are conservative, they know that Marvel is and will be a cash cow. Institutional investment is still very high (almost 70%). I believe that will only go up. With Marvel having a PE of 10 (forward PE of 12) and growth prospects of 10-20% per year, many more institutions should get aboard in the days ahead.

I am continuing to buy shares of Marvel. While most of my shares were bought below $4 per share, I just bought some at $15. I'll buy more as cash allows. I cannot think of any stock with less risk and more potential right now. Everyone needs to do their homework and assess their needs. Cashman says--"Buy now! Shares are on sale!"

Fool on!! Go Marvel!!!


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