“The Motley Fool’s Next 10-Bagger”

Few terms get as much of a rise out of investors as “10 bagger”, the term popularized by Peter Lynch that refers to a stock that increases 10 times in value — and perhaps for good reason, since these kinds of hyper growth stories, even if they take a decade or more to unfold, are rare ducks indeed.

And no one likes the term more than the Motley Fool, whose founders continue that search for ten-baggers with their monthly Stock Advisor newsletter. Want to find out who the latest candidate is?

“Imagine snapping up shares of Disney stock in 1982 just as the VCR emerges, making “properties” like Dumbo, Cinderella, Pinocchio, and Sleeping Beauty into MODERN GOLD MINES…

“At the same moment the BULL MARKET of the 1980s and ’90s is born, pushing your shares up 1,000% in 7 years… and then 2,500% over 15 years!

“You’re about to discover just such an opportunity. In fact, this could be THE STOCK STORY of 2010-2025…”

They don’t pull out the hoary old “what you do with your newfound wealth is up to you,” but they sure do paint a pretty picture of massive profits flowing through to your pocketbook.

The ad also tells us that now is the time to buy — before the recovery is on the tip of everyone’s tongue:

“by the time you read about an economic recovery in the paper — nearly half the profits will already be booked…

“And with the Dow up more than 24% since its March 9 low… ‘I can hear the train a-comin’!’ to paraphrase the late, great Johnny Cash.”

[And just to add on to that, the S&P 500, which unlike the Dow actually means something, is now up almost 40% from its low — still waaaaay down from the multiyear highs, of course, but way up from that low in March.]

They compare investing in this environment to investing at the depths of the early 1980s blahs [I was cursed with acne and adolescence at the time, so I challenge your blahs to match up to mine] …

“That’s because we’re again at a moment of profound doubt and opportunity. And the best way to invest today is the same as it was back then…

“In fact, it’s been the same throughout the market’s history. Just ask investors like Warren Buffett, Peter Lynch, and David and Tom Gardner (who have studied the investing masters closely), who understand that the single most important secret to building a stock market fortune is identifying a unique growth business poised to dominate a mass market…

“Then scooping up shares and holding them tight as the market scales the wall of worry!”

And then we get into the clues about this top secret company …

“The Motley Fool’s NEXT 10-Bagger… the opportunity I’m about to describe shows remarkable similarities to Disney in 1982, and even Marvel in 2002 when David recommended it. Here’s the story…

“This company is revolutionizing its industry. It has a slew of revenue streams that should only grow stronger over time. And we project that it will continue growing at a steady pace well into the next decade….

“This little entertainment dynamo has created some of the biggest Hollywood blockbusters in its category over the last few years. It owns a rich portfolio of intellectual property and boasts talented and experienced leadership…

“And here’s the sweet spot in all this: Widely appealing content like this can create multiple, expanding revenue streams — we saw it with Disney in the 1980s and ’90s (a “25-bagger” between 1982 and 1997!)… and more recently with Marvel (a “10-bagger” between 2002 and 2008!) — and today, this company has some of the best trademarked and copyright-protected characters and content on the planet…

“Which fuels its very profitable model and vast beyond-the-box-office capabilities in DVD sales, as well as product licensing to video game companies, toy companies… even fast-food chains!

“Believe me, I’d like nothing more than to give you the ticker symbol and all the details right here. But out of respect for our paying Stock Advisor members, I must send you the full write-up in a brand-new report called ‘The Motley Fool’s NEXT 10-Bagger’…”

So that’s the big picture about this business model — how about a couple specific clues?

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“… market cap under $2.4 billion….”

So that should be enough for the Thinkolator, yes? Indeed. But first I have to tip my hat to forum mainstay womanwithportfolio, who also suggested the same answer I’m about to give you right now:

Dreamworks Animation SKG (DWA — click here for a free trend analysis)

Our old friend womanwithportfolio, by the way, also runs a pretty cool website herself that you can check out here … but let’s talk about Dreamworks for a minute.

This is a stock I owned a number of years ago (as I did Marvel, David Gardner’s similar stock that he rode to a massive gain over the last seven years — MVL, by the way, could also pretty precisely match most of those clues, but that would be really sneaky). Dreamworks is the animation studio behind hits like Shrek, Kung Fu Panda, Bee Movie and the more recent Monsters v. Aliens, spun off several years ago from the star-studded Dreamworks studio and run by Jeffrey Katzenberg (the “K” in SKG, which also honors Stephen Spielberg and David Geffen, neither of whom is actively involved in DWA). The original Dreamworks studio is now owned by Viacom, but Dreamworks Animation remains independent and publicly traded.

And yes, it was recently priced at a market cap of $2.4 billion (it’s slightly above that now — and the stock has run up about 40% just since April). The shares trade at a current and forward PE of about 14 or so, which is actually very similar to Marvel, the closest comparison company I can think of. Dreamworks makes money by developing new characters and films, showing the films in theaters (through distribution deals with major studios where they get a cut — used to be Paramount, not sure if it still is), and, more importantly, licensing the characters for a thousand products and selling DVDs.

Dreamworks just had their best quarter ever, thanks to the fact that they have a pretty big library of films now that are all generating at least a little bit of revenue (ie DVD sales of Shrek, etc.), and a blockbuster hit last Fall in Madagascar 2. The current movie, Monsters Vs. Aliens, looks like it’s a big box office hit, too, though not in the same league as the Madagascar sequel or any of the Shrek movies so far.

And Dreamworks is pretty much done for the year.

No, that’s not really fair — but, like Marvel, they’re