Discovery Communications Inc. (DISCA), Dolby Laboratories, Inc. (DLB): An Entertainment Firm to Discover

Entertainment companies are among the most fun in which to invest. Why? Because they are a part of everyday life. That’s why I’m excited to see consumer spending on the rise, because that means big profits for these businesses.

Discovery Communications in the developing world

Discovery Communications Inc. (NASDAQ:DISCA) is getting it done both in America and throughout the world. After living in Costa Rica for three months, I noticed a lot of Discovery programs on TV. I couldn’t understand what they were saying, (it was in Spanish), but everyone else there could. And that means advertisers will be glad to spend their dollars to access those eyes and wallets.

Furthermore, as the developing world continues to grow its middle class segment, more people will buy TVs, and that means a bounty of advertising revenue. This company is one of those forward-thinking gems that gives your portfolio excitement and keeps you on the cutting edge of the developing global economy.

Analysts also expect big things from this firm. EPS is expected to grow by 27.5% this year and 29% next year. Revenue is pegged to increase by 24.3% this year, and 11.7% next year. But be wary, as I think those estimates are overly ambitious, and if Discovery Communications Inc. (NASDAQ:DISCA) misses targets, look out.

Dolby hears crisp sound of housing market boom

Dolby Laboratories, Inc. (NYSE:DLB) has its business diversified into two segments that I believe are set to earn substantial profits. First, the company is heavily weighted in the home entertainment segment. Virtually any industry with exposure to the housing market has made considerable gains over the last year, yet Dolby Laboratories, Inc. (NYSE:DLB) has decreased by about 3%. I think the market has missed something.

Secondly, Dolby Laboratories, Inc. (NYSE:DLB) is largely invested in the movie business. When production companies are making gains, so is Dolby Laboratories, Inc. (NYSE:DLB). And considering the improvements in consumer spending over the last year (see chart below), people will likely continue to line up at the theaters to drive up box office revenue.

US Consumer Spending data by YCharts

However, analysts don’t appear to support my sentiment. They expect the company’s EPS to fall by 40.5% this year and grow by only 3.5% next year. Perhaps they think this way because of expiring patents that could have other firms taking some of the company’s business as they develop their own versions of Dolby Laboratories, Inc. (NYSE:DLB)’s technology. Still, I’m keeping this stock on my watch list.