Normally when I invest, I don’t let my emotions get involved — and that makes many of my choices extremely boring. I seek out companies in sectors where I see the most growth, while also having stellar profit margins, revenue increases and undervaluation.
So when I took a look at the financials behind Time Warner Inc (NYSE:TWX), I was extremely excited. This is a company that can not only add some stability to my currently volatile portfolio, it is also a firm that will be entertaining to follow. After all, the company is an entertainment firm, which means that if I invest in Time Warner Inc (NYSE:TWX), I would get my fair share of thrills by seeing its name associated with many of the TV programs, films and publishing operations the company owns. But that’s not why I think this stock would make a great addition to my portfolio.
What makes Time Warner Inc (NYSE:TWX) a gem?
The company is a clear buy for several reasons, including its effort to increase customers through satellite and cable TV providers. This customer base represents a key element for the company that increases the firm’s competitive position.
Time Warner Inc (NYSE:TWX) is also a leader in the “TV Everywhere” initiative, which aims to have a pay-TV subscriber network where people can access programming from multiple platforms. The firm is expected to roll this out over the next several years, and that could significantly increase its revenue.
But perhaps emotions do play a bit of a stake in my appreciation for Time Warner Inc (NYSE:TWX). The firm does own HBO, and that TV channel features some of the best entertainment around. However, when looking at the firm’s profit margin, we can see that this stellar line item sets the company apart from the others. Last year, the firm earned a 10% profit margin. And that has been consistent in each of the last three years. Not only can Time Warner Inc (NYSE:TWX) entertain the public, it can also entertain an attractive return on equity.
Disney sparks nostalgia
The company shows some definite potential. In the resorts and parks division of the firm, The Walt Disney Company (NYSE:DIS) appears to be able to increase its sales, as this sector poses a lot of potential upside due to the economic recovery.
DreamWorks grabs my emotions
I know that Dreamworks Animation Skg Inc (NASDAQ:DWA) is based on imaginary stories–that aren’t real, so my mother says. But when I hear the name, I think about movies like “Shrek,” “Kung Fu Panda,” and “Puss in Boots.” These movies don’t really cater to my generation, but they have a certain amount of appeal when watching them with the family.
However, leaving my emotions aside, there are really several factors that make me not want to buy this stock, even though I love the movies this company makes. First, Dreamworks Animation Skg Inc (NASDAQ:DWA) continues to make failed attempts at building revenue. The company only averages five films every two years, which is not enough to generate significant revenue when talking about titans like The Walt Disney Company (NYSE:DIS). Furthermore, the critics often lambaste many of the company’s films, and this results in lower financial gains.
What to do with these conflicting emotions?
Investors need to put their affiliation for a certain production company to the side. No matter how much you loved “The Little Mermaid,” she is not necessarily going to have you swimming in profits. You need to look at the financial components of these companies before deciding to place a stake of your future in them. After all, that is what you are doing when investing in a stock. If you make a good purchase, the entire outcome of your life could be different than if you don’t buy that stock. That puts a lot of pressure on you, but you must never let your emotions play a role in determining what stock you buy. And, I can say with relatively strong confidence that Time Warner both satisfies the emotions of investors and the sound financial decisions that they need to make.
The article Don’t Let Your Emotions Get in the Way originally appeared on Fool.com and is written by Phillip Woolgar.
Phillip Woolgar has no position in any stocks mentioned. The Motley Fool recommends DreamWorks Animation and Walt Disney. The Motley Fool owns shares of Walt Disney. 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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