Oscar Winners: A Boon for Your Portfolio?

We are done with the Golden Globe and BAFTA awards already and the biggest one is left now – the Oscars. What interests us is how the winners’ list will affect the stocks of the big ticket studio stocks.

Box Office collection gets a big boost following Oscar nominations – obviously adding to the revenues. The winner’s trophy further adds to the uptick with higher sales of DVD, streaming or satellite rights. So this is the right time to top up your portfolio with such stocks.

Nominations & Studios

Movie	Studio	Owner	Domestic Gross	Release Date (US)
American Hustle	Columbia	Sony	$144,597,391	Dec 13, 2013
Captain Phillips	Columbia	Sony	$106,957,071	Oct 11, 2013
12 Years a Slave	Fox	21st Century Fox	$49,280,178	Nov 8, 2013
Dallas Buyers Club	Universal	Comcast	$24,845,161	Nov 1, 2013
Gravity	Warner	Time Warner	$269,502,099	Oct 4, 2013
Her	Warner	Time Warner	$24,124,034	Dec 18, 2013
Nebraska	Paramount	Viacom	$16,669,117	Nov 15, 2013
Wolf of Wall Street	Paramount	Viacom	$113,209,225	Dec 25, 2013
Philomena	Weinstein	Independent	$33,220,299	Nov 22, 2013

(Source: the-numbers.com and Box Office Mojo)

Sony Corporation (SNE) and Time Warner Inc. (TWX) have received 21 nominations each. That may not translate into higher chance of winning the coveted award, but it gets the studios bigger publicity and larger turnout at the theaters.

One stock doesn’t appear on this chart is media behemoth The Walt Disney Company (DIS) has also been nominated for Frozen. This is for the animated feature category. Running for 97 days now, the film has garnered worldwide gross revenue of $9.8 billion.

How Nominations Translate into Higher Revenues

The validation stamp of an Oscar nomination makes movie buffs more interested in the film. Understandably, the increased interests will make the producers look for best avenues to capture the higher demand opportunity. Releasing the movie in a higher number of theaters is one of the best ways to tap into that opportunity.

A report from Australian research company IBISWorld shows that winners of Best Picture categories from 2007 to 2011 “earned $35.3 million in box-office revenue before the Oscar nominees were announced, $29.4 million once they were nominated and $17.9 million after winning the Oscar.”

Last year, ticket sales for Warner Brother’s Argo had jumped 59% a weekend after it was nominated for the best film (among other categories). The Weinstein Company had released The Artist in another 235 theaters after it won an Oscar nomination last year. In fact, nominations provide new life to movies that had departed from theaters and are now headed for the DVD collection.

Thus, the studios jumped to bank on the opportunity this year as well and they bolstered their theater presence.

Warner Brother’s Her was released in just 6 theaters, but the count reportedly soared to 1,700 theaters following the nominations. Also, its space thriller ‘Gravity’ was screened at 944 theaters a weekend after the nominations. Twenty-First Century Fox, Inc.’s (FOX) 12 Years a Slave was screened at 647 more theaters following its nominations. Moreover, National School Boards Association has decided to distribute copies of the film to public high school students in the nation.

Among these nominated flicks, some are even screened for the first time in certain nations. Viacom, Inc.’s (VIA) Nebraska, for example, was released in India this week.

The Trends

Historically, Oscar winning studios have a trend to outperform the sector in the short run. In 2013, Warner returned 8.47% in March as compared to sector’s return of 2.86%. Universal had returned 14.54% and Fox returned 19.18% in March 2010 and 2009 as compared to sector return of 4.05% and 7.12%, respectively. (Data Source: CMC Markets, Bloomberg LP).

The winners’ list becomes all the more interesting as another data from CMC Markets and Bloomberg L.P. suggests that March tends to be a lull period for the sector. For instance, during the trading week immediately following the Oscars last year, Time Warner Cable Inc.’s (TWC) shares improved just 2.4%. Time Warner owns Warner Bros, maker of last year's Best Picture winner, Argo.

Termed as the ‘post-Oscar flop,’ the sector’s rally may slow owing to profit booking being one of the factors. The sector has returned a negative 0.84% on average over the last 25 years while Dow and S&P 500 returned 1.34% and 0.5%, respectively. Thus, it is important for investors to be careful about their winner predictions.

See if you can win by correctly predicting the Oscar winners!

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