And the Oscar for Investing Goes To...


From THESTREET.COM: Mutual fund investors looking forward to the 80th Academy Awards might not realize that they probably own a piece of the Hollywood dream factory.

The age of Samuel Goldwyn-Louis Mayer-type Hollywood titans is long gone. Large, diversified corporations that are common holdings in mutual funds now control the moviemaking business.

With major corporate players such a big part of the motion picture industry, movies are generally intertwined with other lines of business. All the firms are diversified into other aspects of the media business, and some are known as much for their manufactured goods as for their manufactured dreams.

As for mutual funds, a search of Ratings' database could find no pure plays in the movie industry. The business of moviemaking and film distribution is now largely influenced by the corporations listed in the article below. The columns of data on holders of the eight firms show that fund ownership of their shares is relatively widespread.

Because General Electric (GE) controls Universal Studios, a mutual fund with an investment objective of industrial stocks that include GE is also, to a certain degree, a movie play. Universal's Oscar nominees include Atonement from Universal affiliate Focus Features for best motion picture and Cate Blanchett in Elizabeth: The Golden Age for best actress.

With firms such as GE, Time Warner (TWX), Disney (DIS), Comcast (CMCSA) and Sony (SNE) now dominating the movie business, mutual fund interest is relatively heavy because of the firms' other interests, rather than for their respective exposures to the motion-picture business.

Fund holdings of the eight selected companies with movie exposure include 1,630 open-end mutual funds with $118.3 billion in holdings, 82 closed-end funds with positions worth an aggregate $1.3 billion and 380 ETFs with a combined $12.7 billion investment.

The purest movie play among the funds is the Fidelity Select Multimedia Fund (FBMPX), which holds positions in five of the movie companies worth a total of $26.7 million. That amounts to 35.5% of its portfolio, making it the only fund with more than 20% invested in the movie-making firms on the list.

FBMPX's top holdings are Time Warner, News Corp. (NWS), Walt Disney, Comcast and Viacom (VIA).

The only other fund on the list focusing specifically on the leisure sector is the Rydex Series-Leisure Fund (RYLSX), with positions in four of the stocks worth $0.9 million and making up 14.2% of its total new worth. RYLSX's top holdings are McDonald's (MCD), Walt Disney, Comcast, News Corp. and Viacom.

Three of the open-end funds and five ETFs indicate by their respective names that they focus on consumer-discretionary or consumer-services investments. Some have holdings in as many as six of the eight movie firms.

With the increasing probability of a recession, it is important to remember that the movie business remained relatively prosperous during the Great Depression of the 1930s, as the public attended movies regularly to escape from the economic realities of the time.

In addition, the proliferation of 3-D movies should help producers' and distributors' bottom lines. There is little indication that U.S. dominance of the motion-picture industry is seriously threatened, and many emerging nations are realizing that piracy is not in their best interest, which should enhance the international revenue of the film companies.

Despite all these positive signals for the business, though, it actually might be fortunate for investors that firms in the movie industry do not dominate any mutual-fund portfolios, and that the dominant companies in motion pictures are diversified into other businesses.

As profitable as blockbuster films might be, the bottom line of any given studio is ultimately subject to the tastes of moviegoers, which can be exceedingly hard to predict.


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