Motley Fool’s “The Best Stock Idea I’ve Ever Seen”

by Travis Johnson, Stock Gumshoe | February 29, 2008 10:43 am

OK, so this one is quick and dirty. No, not that kind of dirty! Get your mind out of the gutter, it’s not even Noon yet.

It’s not from an email ad, but from something else — I have recently noticed that the folks who write the free articles for the Motley Fool[1] seem to have gotten more and more aggressive about pushing their premium newsletters in the free articles. They’ve always mentioned them, and often teased some ideas, but it seems to me that the push must be increasing. Maybe their venture backers are anxious for them to get more profitable, or position themselves for an IPO[2] or something when the market turns later this year (if it turns). Just my speculation.

But anyway, there was a genuine teaser in a Fool article I read the other day — this one from Tim Beyers[3], one of their analysts whose work I like and who has been around for quite a while.

The article was entitled, teaserly enough, “The Best Stock Idea I’ve Ever Seen[4].”

And unlike almost every other Fool article I’ve ever read, it didn’t name the stock — in true newsletter ad fashion, it teased a few clues and offered a free trial subscription to Motley Fool Stock Advisor[5], whence the idea came.

So what are those clues? Here they are, as written:

“Free cash flow exceeded $100 million last year.”
“Revenue is up more than 20% over the same period.”
“Operating margins are expanding dramatically, and net margin is north of 25%.”

He also notes that the stock was originally a pick of David Gardner[6] back in July 2002.

So what are we dealing with here? Well, perhaps not surprisingly, it’s the same one they were teasing in January 2008, in a more traditional email ad that called it the “Best Stock of 2008[7].” Not as hyperbolic as the “Best Stock Idea I’ve Ever Seen,” but still enthusiastic.

Yes, it’s Marvel Entertainment[8] (MVL)

And yes, I still own shares. They’re priced about the same, at $25+, as they were back in January when I last wrote about them, and they’ve been in the same mid-$20s range for a little while as we wait for the release of Iron Man. Earnings were very good when they were released last week, but the bad news is that they will probably only produce a maximum of one of their own self-financed films in 2009 (instead of the planned two), largely due to the writers strike. They still plan to average two per year, so I guess they must be planning on catching up in the out years.

The money from Iron Man and the Hulk, if it comes in as hoped, will really hit the company about a year from now, when all the DVD sales are in and the murky Hollywood accounting is laid a bit more bare for us, but we’ll certainly know a lot more about the company’s potential as a film producer by the time the second weekends of Hulk and Iron Man are released in just a few months (Iron Man is coming out on May 2, Hulk about six weeks later).

So — I still own shares of this one, and I know there are some among the Gumshoe faithful who like it and some who hate it. I know Tim Beyers thinks it’s the best idea ever, but of course he’s not in charge of your money and I’m sure that, like the rest of us, he’s been wrong before. Jim Cramer, who I still hear in my sleep[9] sometimes, thinks “The trade has been made. The money’s been made” and that you should sell[10].

So what do you think? Like the idea? Hate it? Irritated that the Motley Fool is more aggressively teasing their newsletters in their free articles? Any opinions welcome.

Want to keep up with the Gumshoe? Click here to subscribe now — free email alerts.[11]

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