I distinctly remember studying the Great Depression in my 8th grade U.S. History class. Our teacher explained that while just about every industry was crumbling, Hollywood was able to hold its own -- comparatively speaking. The reason, she explained, is that people always want to be entertained, particularly during tough times.
That's why investing with the industry's winners can pay huge dividends for your retirement portfolio. Below are three of the best companies in entertainment that deserve your consideration.
The king of entertainment
No list like this should be taken seriously if it doesn't include Disney (NYSE:DIS). The cultural ubiquity of the company and all of its properties is unmatched in American history. From Mickey Mouse to Elsa, and from ABC to ESPN's SportsCenter, Disney owns some of the most valuable brands in the entertainment world.
To get an idea for how well the company is performing financially, it's helpful to break out the different segments the company reports.
While studio revenue can be hit or miss depending on the success of various movies, Disney's revenue from its parks and its media networks -- including ABC, ESPN, Disney Channel, and A&E Television networks -- has shown steady growth.
You can buy the company today for 23 times earnings -- which isn't cheap, but also isn't overly expensive. A 1.1% dividend yield also comes with the deal, as well as excitement over what Disney can do with the Star Wars film brand.
There's no company that's done more to lead the entertainment industry into the 21st century than Netflix (NASDAQ:NFLX). The company was able to oust Blockbuster with its DVD mailing system featuring no late fees.
But its most crucial move was introducing streaming movies starting in 2007. What started off as a small experiment quickly became the way business was done for many TV shows and movies. While it hasn't always been a smooth ride (remember Qwikster?), Netflix has continued to innovate by developing its own hit TV shows in-house -- led by Orange Is the New Black and House of Cards.
The company's ranks of subscribers have swelled based on this original content, as well as efforts to expand in international markets.
Though Netflix trades for a pricey 128 times earnings, much of that is because revenue has been eaten up by the cost of original programming and moves abroad. Management has announced that it hopes to be in 200 countries by the end of 2016.
While that means it may continue to be a bumpy ride for shareholders, there's no doubt that Netflix is positioning itself to be the premier entertainment conduit for the world.
I'll leave you with one entertainment company that operates below many investors' radars: Lion's Gate Entertainment (NYSE:LGF-A). This is the outfit behind the successful Hunger Games, Divergent, and Twilight series of films.
The company is picky about the movies that it produces, and it has found a lucrative niche in the tween crowd that flocks to these movies -- and often brings their parents with them. But Lion's Gate also produces a bevy of popular TV shows, including Mad Men and Orange Is the New Black.
The company trades at a reasonable 22 times earnings. That's largely because being in the business of solely producing movies and TV shows can expose a company to the whims of a viewing audience. For this reason, a bet on Lion's Gate is largely a bet on CEO Jon Feltheimer, who has been at the company's helm since 2000, and has done an excellent job guiding the company through a changing landscape in Hollywood.