With the recent blockbuster opening of The Incredibles, Motley Fool Stock Advisor recommendation Pixar (NASDAQ:PIXR) once again demonstrated the movie-making expertise that drives the company's success.
Unlike movie studios Time Warner (NYSE:TWX), Walt Disney (NYSE:DIS), and Sony (NYSE:SNE), Pixar has a few people who have been with the company for some time. It is these talented individuals -- Steve Jobs, Andrew Stanton, Brad Bird, John Lasseter, Pete Docter, and Lee Unkrich -- who help create the outstanding stories from which Pixar movies are born.
If you read my recent article on fellow Stock Advisor recommendation Marvel Enterprises (NYSE:MVL), then you'll know a movie usually needs a great story to be successful. Look at Pixar's movies -- Toy Story, Toy Story 2, A Bug's Life, Monster's Inc., and Finding Nemo -- and you'll notice a few things in common. They are all movies that follow a simple, straight-line narrative with great characters, clever dialogue, and emotional resonance. The movies don't meander, and they don't stall for time. The story is constantly moving forward, and that keeps audiences, especially kids, attentive. Marvel's films also tell great stories, but in an entirely different genre.
Even though their business models are a little different, the bottom line for Pixar and Marvel is the same. Their success depends largely on making great movies.
Pixar, in fact, relies heavily on box-office gross and ancillary market revenues to drive its profits (and those profits will likely increase since Pixar severed its future relationship with Disney). Marvel's wider character licensing makes its income stream more diversified.
If an investor keeps an eye on who comes and goes from these respective companies' brain trusts, the scripts that get sneak-peeked at places such as Aintitcool.com, and movie trailers, he or she might be able to get a feel for the quality of upcoming releases. One stinker is not likely to sink either company and may even create a buying opportunity. But if you find yourself bored at a movie, chances are other folks will be, too. That's the first tip that it might be time to cut back your exposure.
Currently, however, everything points to continued success for both Pixar and Marvel. That's the kind of story investors love to hear.
Fool contributor Lawrence Meyers has been compared to an animated superhero and owns shares of Marvel Enterprises.
