Marcus Corp (MCS) is a company that showed up in a stock screen I ran late last year and then mentioned in a blog entry titled Lets Go To The Movies a little over six months ago. Marcus currently owns and operates 501 movie screens in addition to owning resorts and hotels like the Westin Columbus hotel and the Four Points by Sheraton in downtown Chicago.
While everyone is proclaiming the death of the traditional movie theatre, Marcus, which already owns 501 movie screens in the mid-west, is breaking ground on another 16 screen “Movie Palace” called “The Majestic” (yes like that strange Jim Carrey movie) in Brookfield, Wisconsin. It is good to see that this new project will include cafes, a lounge and two 72 foot ultra-screens and will not be just another movie theatre with bad service and an overpriced concession stand. In case you missed this interesting tidbit of information, according to the Los Angeles Times, $30 worth of corn translates into $3,000 of popcorn sales for the movie theatres.
As mentioned in my earlier blog entry, 2005 was a terrible year for the box office and investors fled stocks like Marcus fearing a sequel in 2006. However the box office returns in 2006 have been much stronger thanks to movies like Cars and a swashbuckling $132 million debut by “Pirates of the Caribbean: Dead Man’s Chest”. According to Box Office Mojo, year-to-date 2006 box office returns are up 6% when compared to 2005. Marcus has already seen a 23.9% rise in its stock since it was mentioned in January (after including the $7/share special dividend distributed in February).
With strong hotel occupancy rates and a good 2006 box office thus far, there is a chance Marcus may have additional upside in the coming months. With average daily volume of a little over 100,000 and a market cap of $644.6 million, Marcus continues to remain relatively undiscovered. Marcus is slated to release quarterly results this Thursday, July 27.
Another option I am considering to invest in this sector is through the independent movie studio Lions Gate Films (LGF), which was recently featured in this fortune magazine article and this blog post by Travis Johnson.
Voluntary Disclosure: I currently own a long position in Marcus.