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3 Entertainment Stocks to Add to Your Portfolio

By Emmanuel Floriann, Magto - Sep 10, 2013 at 1:16PM

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You can become a part of the success of the next sequels of Avengers, Man of Steel, and X-men by investing in these stocks.

Recent box office hit Man of Steel was a blockbuster movie that surpassed the $600 million mark. Only 80 films have been able to achieve such a milestone. You can benefit from the success of big-screen films in the future by investing in entertainment stocks with great potential to give higher returns from investment.

The producer of Man of Steel
Time Warner
 (TWX) is the company behind several blockbuster films including The Dark Knight, The Harry Potter series, The Hobbit, and Pacific Rim, among others. For the second quarter of 2013, the company reported solid performance. Revenue and earnings were up, partly fueled by its recent blockbuster movies, Man of Steel and The Great Gatsby.

Growth was also driven by increased earnings from cable TV advertising, which grew 11%. The company's net earnings jumped to $771 million, up 87% from $412 million a year ago. Consequently, Time Warner raised its earnings projections for this year.

Time Warner still has several films scheduled for release this year and in the ensuing years. Its upcoming films include the two sequels to The Hobbit, scheduled for release in December 2013 and December 2014, respectively; The Lego Movie, to be released in February 2014; 300: Rise of the Empire in March 2014; Godzilla in May 2014; Man of Steel 2 in 2015; The Flash in 2016; and Justice League in 2017.

Future growth will also be fueled by TV advertising from its cable television segment that airs popular channels like CNN and TNT. Revenue from this segment will normally increase during annual sports events like the NBA playoffs. For this year, Time Warner shares have performed well, gaining 50% year to date.

The name adored by kids
When you talk movies with your kids, Walt Disney (DIS 2.33%), pioneer of big-screen animated films, is bound to come up.

What sets Walt Disney apart from the rest is its fully diversified structure, which goes beyond movie production. It has five main business segments that include parks and resorts, studio entertainment, consumer products, media networks, and interactive media. This gives the company better stability since it is not fully dependent on the success of its films. Nonetheless, movie production is important, and a major dent in this segment will significantly affect the overall business.

Recently, Disney suffered a major loss from its movie, The Lone Ranger, that will lead to a writedown of about $190 million. As a result, the studio entertainment division struggled with declining earnings. But this was offset by profits in other segments, particularly the media networks and the resorts and parks.

Walt Disney is a very attractive long-term investment. For this year, shares of Walt Disney already gained 25% year-to-date.The upbeat momentum will be sustained by earnings from different segments.

For this year, Disney is set to release Thor: The Dark World, Planes, and Frozen. For 2014, Captain America: The Winter Soldier, the Good Dinosaur, and the Guardian of the Galaxy are the ones to watch for. This will be further reinforced by the upcoming films of its new acquisition, Marvel, which is set to release the next sequels to the box office hit Avengers.

The maker of the all-time top grossing film
Not to be missed is Twenty-First Century Fox (FOX), formerly a part of News Corp prior to June 2013. The company is most recently famous for its Avatar film, dubbed as the top-grossing film of all time with a commanding worldwide box-office gross of $2.8 billion, surpassing the worldwide gross of Titanic at $2.1 billion. It is also the company behind numerous popular films like the X-men trilogy, the Ice Age series, the Chronicles of Narnia, and Die Hard. Just like the others, Twenty-First Century Fox is well-diversified with several business segments that include the cable network, filmed entertainment, and television segments.

Twenty-First Century Fox recently reported a robust fourth-quarter performance with steep increase in revenue fueled by higher cable-TV fees. Full year revenue and earnings also improved over last year as a result of the combined performance of the television, filmed entertainment, and cable network groups. Twenty-First Century Fox has numerous films up for release in the next few months that include Rio 2, X-men: Days of Future Past, Dawn of the Planet of the Apes, and The Fantastic Four among others. Fox shares have gained the most among the three, rising an astounding 33.56% year-to-date.

The bottom line
In the long run, it makes sense to add these companies to your watch list. You will not only enjoy the movies that these companies produce, but your portfolio will also benefit from future box-office hits.

Emmanuel Floriann Magto has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
$109.11 (2.33%) $2.48
Twenty-First Century Fox, Inc. Stock Quote
Twenty-First Century Fox, Inc.
Time Warner Inc. Stock Quote
Time Warner Inc.

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