My best trade in a long time: I bought WWE a little over one year ago. I bought it because I’ve owned the stock it the past and it was yielding over 5% and I love dividends. Anything that gives me 5%, and I think the company will still exist it a few years and I think the dividend is safe, I’M A BUYER. So apparently the TV contract is coming up and WWE is one of the few shows people actually watch live. So the stock went up, and went up a lot.
So what did I learn? First, dividends are the best. The safety of a ~5% return makes stock price moves less painful. Second, out-of-favor brands can have tremendous upside. Check out ICON, or TUP, these are brands or companies that own brands that have been around forever, that were out of favor. Playboy and Marvel are two decade old brands that got bought and were unvalued. Yahoo, an out of favor media brand hires a new CEO and triples.
On the flip side I did buy JCP at 20 and rode it down to 10 (ok, fine maybe 8). I recently bought some again at $5. I just can’t resist out of favor brands. The problem with JCP is that it’s a retailer and not just a brand, but I just can’t resist the upside when people change their mind about a brand. I think buying an out of favor brand, that has a history of at least 15 years is just too tempting.
I analyzed Marvel before it got bought, and looked at it two ways. You can look at it as an EPS/cash flow story, on which the company was not cheap (it wasn’t too expensive either). Or you can look at it like, “Spiderman is worth at least 1 billion”.
Any good consumer brand companies out of favor right now? Because I’m interested.