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Lets Go To The Movies

  • January 19, 2006

2005 was a terrible year for the US box office with ticket sales dropping close to 6% when compared to 2004. The much anticipated release of Kong and The Chronicles or Narnia did little to save the dismal year. However 2006 could be a promising year with the release of The Da Vinci Code, Poseidon, Mission Impossible 3, X-Men 3 and even a Superman movie. To top it all there is the Pixar movie Cars and the IMAX (IMAX) special Deep Sea 3D.

Marcus Corp (MCS), a stock with an extremely low P/E (high single digit) showed up in a stock screen I ran a few months ago. If you haven’t already guessed, Marcus is in the movie business and runs over 500 movie screens in the Midwest. It also owns a bunch of resorts and hotels, including the Four Points by Sheraton in downtown Chicago. After following the stock for months and watching it oscillate around $24 a share, I finally decided to start a position yesterday. The reason I started a position in Marcus had little to do with its low P/E as the current P/E is already at 24.9 after a disappointing year. Marcus announced a special dividend of $7 per share yesterday and also bumped up its regular quarterly dividend by 36%. A quick glance at their strong balance sheet makes it clear that the total cash per share works out close to $10 per share. So you get the movie and hotel business for under $15 a stub. If 2006 box office receipts turn out as good as expected, Marcus could also be in for a good ride in 2006.