If you had to invest in a movie, would go in on a film starring Brad Pitt of Emilio Estevez?
If you’re like most people, you’d say Brad Pitt. He’s a huge star! It doesn’t get any bigger than Brad Pitt. Why not hitch your wagon to the Brad Pitt express? As for Emilio Estevez, is he even acting anymore? Is he a bartender at the local pour house?
Well, you’d be surprised to find out that Brad Pitt is the least profitable actor in Hollywood. Yep, that’s right! A recent study by PartyCasino that looks at the box office receipts of movies back to 1980 shows Pitt is a total dud, returning just $0.10 for every dollar budgeted for his films.
Robert De Niro and Johnny Depp aren’t too far behind. They’re sort of like the FAANG actors of Hollywood. There’s plenty of hype surrounding them, but also dubious returns, and, often total headaches too.
The FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google) remind me of Brad Pitt. The Brad Pitts of the stock market appear sexy and receive all of the glossy press. They have good hair. They dress nicely. They look like they should be super profitable. But, at the end of the day, those stocks are more like horror movies than big-budget blockbuster action thrillers.
It often ends badly.
Remember the Nifty 50 stocks?! The Eastman Kodaks and the Polaroids of the world? How about the Four Horsemen of the Internet? Many of those stocks have either imploded or have ceased to exist. They sure looked good, right? They were the Brad Pitts of their time.
According to research from the investment bank Jefferies, just 14 stocks accounted for 20% of the stock market’s gains since 1924. Most of them are household names like General Electric Co. (NYSE: GE), Johnson & Johnson (NYSE: JNJ), and Wal-Mart Stores Inc. (NYSE: WMT). Few of the hot stocks of the past have made it into the upper echelon of the stock market. Most are Johnny Depps and are barely profitable.
Just as I avoid Johnny Depp movies like the plague, I avoid Johnny Depp stocks.
I search for hidden profits among companies that may not be household names. Often, they’re hidden in plain sight.
At Hidden Profits, we’re looking for the Rose Byrnes and the Regina Halls of the market. These are the two most profitable female actors since 1980. Truth is, I couldn’t pick them out of a lineup. I enjoy movies, especially documentaries. While Rose Byrne’s name rings a bell, I really have no idea who she is.
But she’s been hidden in plain sight for years. Her movies are uber profitable.
And, as I point out right off the bat, Emilio Estevez is the most profitable male actor. Let me say that again:
Emilio Estevez is the most profitable male actor in Hollywood!
And that’s without a fraction of the hype and headlines that someone like Brad Pitt gets. So how do we go about finding the Rose Byrneses and Emilio Estevezes of the stock market at Hidden Profits?
First, we focus on companies that pay you, the shareholder, first. Many CEOs and CFOs are in it for themselves. They have big mansions to fill with goodies. They need to extract as much as they can from the companies they manage. But not all management teams are like that (no, seriously). There’s a handful of operators that return cash to shareholders with a dump truck.
That’s where we start our focus. We also want them to have incentives aligned with shareholders. The better they do for us, the better they do for themselves. Many of these management teams have incredible long-term track records and significant ownership in the companies they manage.
Next, they have good earnings quality. We don’t want management teams pulling the wool over investors’ eyes to hide deterioration in their business. Every business experiences a bump on the road on the path to prosperity. We want open and honest dialogue with shareholders.
Third, valuation matters. We want to buy $1.00 for $0.75 or less. Typically, there’s a misunderstanding about a business that provides an opportunity to get in on the cheap. If the story is all roses and champagne, then there’s no edge in buying the stock everyone else already knows is performing well.
Last week I presented one such stock at the Irrational Economic Summit – a Rose Byrne opportunity. The company operates truly iconic brands. The owner-operator is a self-made multi-billionaire with a huge economic interest in the stock. His last 12 deals have generated an internal rate of return of 60% annualized.
But the company he manages has been bankrupt before, so we’re talking about a turnaround story. Plus, the company went public in an unconventional way, which meant Wall Street didn’t get paid. If Wall Street doesn’t get paid, then Wall Street doesn’t like you. There’s almost universal bearishness on this stock.
A little positive news may go a long way to propel its price higher. Of course, you could just ride the trend on the latest cybersecurity play, some gaudy Brad Pitt flick with a lot of guns and explosions and CGI, but I’m putting my money on Emilio Estevez.
If you’d like to know more about this stock and other shareholder yield gems, try Hidden Profits at no risk here.
John Del Vecchio
Editor, Hidden Profits