On paper and with a limited context, everything appears right with the markets: the Dow Jones Industrial Average is up into double-digit territory for the year, while Washington avoided a potentially disastrous gridlock. But recent developments haven’t stemmed legitimate concerns. Considering the unconvincing nature of the current rally, investors may want to load up on entertainment stocks.
At first, the notion appears counterintuitive. Despite some progress in our government dealings, our nation remains bitterly divided. Adding to this combustible environment, President Trump has high-stakes meetings coming up with Chinese and North Korean leadership. From a common sense perspective, the best stocks to buy appear to be boring, but stable companies.
Certainly, that instinct is a viable one at this juncture. Nevertheless, entertainment stocks offer potential upside, especially if the broader markets take another dip. For one thing, Americans have a history of resorting to escapism during troubled economic times.
While we take the idea of entertainment, and by logical deduction, entertainment stocks for granted today, back in the early 20th century, such frivolities were envy-inducing luxuries. However, the Great Depression changed that perspective, leading media institutions to specialize in escapism.
In fact, some historians have argued that the amusement and entertainment industry kept the American psyche intact during the depression!
Moreover, within the discretionary budget, entertainment expenditures feature secular trends. In good or bad times, I’ve yet to meet an individual who didn’t set aside some money for rest and relaxation. Therefore, the amusement industry offers some of the best stocks to navigate pensive waters.
With this list, I cover multiple subsegments of the amusement industry, ranging from sure-things to speculative opportunities. Here are my choices for five entertainment stocks that can weather a market storm:
AMC Entertainment (AMC)
When I think about the Great Depression, I envision bankers jumping off tall buildings. However, this dark period in our history ironically produced Hollywood’s golden age. Eager for distractions, millions flocked to the box office weekly despite their strained finances. This piece of Americana still vibrates spiritually with AMC Entertainment (NYSE:AMC).
But in the digital age where content streaming reigns supreme, many folks dismiss AMC stock. Admittedly, its fallout from last October’s broader market selloff hurt my bullish argument. Nevertheless, I remain optimistic over the long haul.
If the popularity of the NFL has taught me anything, it’s that Americans are willing to shell big bucks for a few hours of amusement. But at a certain point, everyone runs into budgetary constraints. For the price of one ticket to a football game, a family of four can watch a summer blockbuster.
In terms of entertainment value, AMC stock simply makes logical sense.
Within the entertainment industry, hands down one of the best stocks to buy is Disney (NYSE:DIS). For starters, the Magic Kingdom is an American icon that practically defined and redefined the sector. Also, DIS stock has largely remained stable through some very turbulent years.
But what I really like about this company is its content umbrella and distribution dominance. Most fans recognize DIS stock as an investment into the Star Wars franchise. But with their acquisition of Twenty-First Century Fox’s (NASDAQ:FOXA) entertainment assets, Disney brought together several enviable franchises under one roof.
As a result, Disney can distribute and profit from these assets more effectively than its competitors. The current cinema landscape is geared toward the sci-fi and comic-book based blockbuster, presenting natural tailwinds for DIS stock.
I haven’t even touched Disney’s theme parks and resort business, which is also a big draw domestically and internationally. If you’re seeking broad coverage in your entertainment stocks, DIS is your best bet.
Telecommunications is a vital sector, but one that’s hardly entertaining. In fact, I’ve said multiple times that telecom firms are downright boring. But in the age of consolidation, business titans have engaged an acquisition streak. The most significant of these mergers is the AT&T (NYSE:T) buyout of Time Warner.
Among the key assets going to T stock is HBO. While the premium-cable channel is historically rooted in the cord, its original content gives cord-cutter Netflix (NASDAQ:NFLX) fits. Sure, NFLX enjoyed a resounding night at last year’s Emmys. But HBO, with compelling titles like Game of Thrones and Westworld, firmly stood its ground.
While the Time Warner deal attracts criticism for its hefty price tag, at least AT&T has winning content assets. Unfortunately, the same cannot be said for Verizon (NYSE:VZ). Plus, T stock will surely enjoy upside movements once the 5G rollout begins in earnest.
As a whole, AT&T isn’t just among the best entertainment stocks, but one of the best stocks in any industry.
Live Nation Entertainment (LYV)
With entertainment stocks increasingly taking on technological overtones, it’s easy to dismiss traditional, analog forms of amusement. After all, our stereotypical image of young millennials involves them plastering their heads into their smartphones. But Live Nation Entertainment’s (NYSE:LYV) longer-term successes dispel that assumption.
Since the beginning of 2017, LYV stock has doubled in market value. This surge runs counter to the digital revolution impacting the music industry. Thanks to streaming services, you can get the music that you want from multiple artists, all at reasonable prices.
Yet concert-ticket revenues over the last few decades indicate steadily rising popularity for live music. Moreover, millennials are driving this trend. Just as significant is their reason to do so: A vast majority attend music festivals to “escape the daily grind.” Clearly, LYV stock offers potential upside irrespective of what happens in the underlying economy.
Wynn Resorts (WYNN)
In March of last year, I had legitimate concerns about Wynn Resorts (NASDAQ:WYNN). At the time, sexual misconduct allegations forced former CEO Steve Wynn to resign. But that wasn’t the issue I felt would derail WYNN stock. Instead, it was the disappointing Las Vegas economy.
Using data from the Las Vegas Convention and Visitors Authority, I determined that Wynn Resorts wasn’t benefiting from tourism. While visitor stats increased, gaming revenue consistently decreased from its 2007 peak. That signaled to me that the catalysts for WYNN stock — namely, high-rollers who don’t give a “darn” — were fading.
And boy, did it ever! Between the end of May through Dec. 31, WYNN stock tanked 49%. But if you’re eyeing a speculative shot among entertainment stocks, pay attention: Last year, Clark County gaming revenue totaled $10.25 billion. This is the first time since the sub-prime lending crisis that Vegas has hit the $10 billion mark.
It’s risky, but WYNN could be one of the best stocks for a surprising turnaround.
As of this writing, Josh Enomoto is long AMC stock and T stock.