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
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.
DreamWorks figurines with turn to cash
Dreamworks Animation Skg Inc (NASDAQ:DWA) is looking to profit from a newly developed retail segment. I think this move could spell big gains for the company, as its movies are essentially advertisements for toys associated with characters in flicks such as “Shrek,” “Madagascar,” and “The Croods.”
While not every one of DreamWorks’ films are massive hits, there are enough recognizable characters in these movies to justify a retail segment. In fact, the company releases about 5 movies every two years, and that gives Dreamworks Animation Skg Inc (NASDAQ:DWA) a competitive advantage. The retail segment should help increase sales from each of those productions.
Analysts are also believers as they think the company will turn things around this year and generate profits. While the company lost $0.43 per share last year, this year should increase to $0.76 on the plus side. And that’s expected to go up another 33% next year.
This one’s the best
Discovery Communications Inc. (NASDAQ:DISCA) has consistently put out some of the most intriguing content available, and its reality shows are top notch. Furthermore, prospects in the developing world will provide a sturdy backbone over the next 20 years. DreamWorks also entices me with its retail segment, and I doubt Dolby Laboratories, Inc. (NYSE:DLB) will just wither away. These three companies are at the forefront of creativity and placing one in your portfolio might further increase your passion for investing.
The article An Entertainment Firm to Discover originally appeared on Fool.com and is written by Phillip Woolgar.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends Dolby Laboratories and DreamWorks Animation. Phillip is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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