“Best Idea Ever” … maybe in a few months

By Travis Johnson, Stock Gumshoe, November 4, 2008

Marvel (MVL) continues to be a very strong performer this year — Iron Man has raked in the cash after becoming the first real blockbuster of the Summer, and that continues to rake in the earnings even with the relative disappointment of the latest Hulk movie.

Even though this stock has been repeatedly touted by the Motley Fool as the “best idea ever” and as a spectacular investment, I think there’s still plenty of time for patience.

And today’s earnings release was really the first official word of that — Marvel had a great quarter, beating estimates and recording some nice revenue from Iron Man, but they warned that 2009 would be pretty tepid, with a fairly weak forecast for licensing revenue and, perhaps more importantly, the lack of any Marvel Studios films in 2009 (the plan prior to last year’s writer’s strike was to release two of their self-produced films each year, but the strike delayed 2009’s films by a year).

The outlook for Marvel is very good in the long term, I believe — but once the Iron Man DVD revenues dry up after the holidays, there aren’t any big money drivers for the stock in 2009. There will be one or two films for which Marvel receives licensing and royalty revenue, but an expected significant drop in Spider Man toy and licensing income and the lack of a new feature film franchise from their own studios led the company to downplay 2009’s prospects.

I would like to buy Marvel shares again, but I sold my holdings back in July and have been unwilling to buy again above $30. MVL has ridden out the market crash with relative aplomb, but with the market generally looking out six-12 months I think we will probably see lower prices still as short-term investors lose interest in the months to come. 2009 stretches out before Marvel with a surfeit of positive catalysts, but at some point the prices might get very appealing for those who look forward to potentially great performance in 2010.

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