LGF: The Hunger Games Trade

Rudy Martin

When I worked at Fidelity Investments, Peter Lynch told me his investment process usually boiled down to one or two key points. That’s certainly the case with Lions Gate Entertainment (LGF).

The firm’s massive Hunger Games franchise is the gift that keeps on giving. At least two new releases are on the way in the next two years.

The younger adult audience that loves the book and films is gaining prominence in the U.S. More important, it is also the fastest-growing segment of the vibrant emerging-market middle-class consumer market — one of my core investment themes.

Even if you’re not a fan of the movie franchise, here’s why the broader investment opportunity it presents could pay off thanks of generations of current and future fans. …

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Internal Sponsorship

The movie’s first foreign release was in Brazil, where the average age is 30, and it resonated with that audience. Opening week in Brazil doubled the initial take here.

‘Beauty Before Age’

Lions Gate clearly knows where its consumers are. In line with the beauty-before-age approach, the movie will open last in Italy and Japan — where the average age is 44.

I have never seen so many young people come out for a movie in Florida. I expect the opening-night excitement to continue at least through year-end.

Today’s biggest Hollywood movies often earn 50% to 70% of their revenue overseas. The current global sales projections for Catching Fire are in the $950 million to $1 billion range, with the majority in overseas markets.

Proud owner Lions Gate also has "Divergent" waiting in the wings with the same low-cost, high-teen-appeal formula.

Look to the Bigger Trend for Bigger Opportunity

The studio isn’t the only one making money. I can think of several other stocks that earned money from my own movie date.

I used Comcast (CMCSA) property Fandango.com to pre-purchase tickets. I expect an enormous traffic increase will boost their Q4 subscriber totals.

At the theater, the agent scanned the tickets in my Apple (AAPL) iPhone. A helpful e-mail informed me that I could purchase movies for download from iTunes — by far the most-popular online movie store in the world.

My date, a schoolteacher, reminded me it was a school night. I suggested she consider it a field trip. She was not amused and let me know she could just as easily buy the book at a discount through Scholastic (SCHL) or Barnes and Noble (BKS). Both sell the whole Hunger Games book series.

We had a great evening. I hope you enjoy the movies as much as I do. I’ll bet you find at least one investment idea you can use for your own portfolio.

In full disclosure, my fund Acamar Global Growth Fund has a profitable and growing position in Lions Gate.

Write me and let me know what your experience on this movie was, and I hope you enjoy the rest of your long holiday weekend!

Happy trading,

Rudy Martin

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Your thoughts on “LGF: The Hunger Games Trade”

  1. Good catch Mr. Martin, stepping outside the traditional investment opportunities and seeing a bright light in entertainment. As long as Jennifer Lawrence is tied to the franchise, this is going to be big and the fact that they are fast tracking the releases makes the investment opportunity even better.

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