Editor’s Note: One of our colleagues at Tradesmith, an affiliate of InvestorPlace, shared this article with us just this morning – and we knew we had to get it to you right away. Check it out below…
Takeover plays, breakups and spinoffs, stock splits, share buybacks, recapitalizations, activist targets and more.
Wall Street pros refer to these as “special situation” investments.
We view them as catalysts for some of the biggest money-making opportunities you’ll find.
And they’re everywhere.
In stocks, in bonds, in closed-end funds.
In Wall Street Journal headlines. On CNBC. Tucked deep inside that inscrutable corporate earnings statement. In an activist investor’s edgy letter to a recalcitrant CEO.
Some of these opportunities are right there in plain sight. Others take a bit of Sherlock Holmesian detective work to uncover.
Finding these special situation plays isn’t the challenge.
Finding the right ones (at the right time and at the right price) is the name of the game.
That’s where TradeSmith comes in.
We’ll do the legwork for you by helping to sift through the market morass of possible investing plays and identify those with the most promise using our proprietary analytics.
In this article, we’ll dig into a global media and entertainment innovator whose stock is in our Green Zone, meaning it’s currently trading in a healthy state.
What’s more, there’s an additional kicker here – one that may make this a special situation “coup de grâce.”
It may be a takeover target.
This is a company whose content gets piped into a billion households each week. A number like that will make it a juicy target for companies like Netflix (NFLX), Amazon (AMZN) and The Walt Disney Co. (DIS), which are vying to stay relevant in a global video-streaming market that’s projected to soar from $473.39 billion today to $1.69 trillion by 2029.
The opportunity to buy a content producer like the company we’re about to share is rare, and you can get in ahead of one of the well-heeled suitors I just mentioned.
So let’s get ready to rumble…
To Be the Man, You’ve Got to Beat the Man
When Vince McMahon purchased his father’s wrestling company in 1982, Forbes said that he “transformed the World Wrestling Federation from a regional operation into a global phenomenon.”
He didn’t create pay-per-view sports events, but WWE Hall of Fame wrestler Kane said, “You can make an argument that he was the guy that perfected it.”
In 1985, the first WrestleMania took place in New York City’s Madison Square Garden, and in 1986, “WrestleMania 2” was broadcast as a pay-per-view event. The show was held simultaneously in New York, Chicago and Los Angeles. As one of its main events, it featured a boxing match that pitted Roddy Piper against Mr. T. But even by wrestling standards, it was excessive, and the company decided to abandon the three-venue format.
By tweaking what worked and what didn’t with WrestleMania 2, McMahon hit his stride in 1987 with WrestleMania III. At the Pontiac Silverdome in Michigan, Aretha Franklin sang a rendition of “America the Beautiful,” Hulk Hogan body-slammed the 520-pound André the Giant in the show’s main event, and the WWE generated $10 million from pay-per-view sales.
Today, WrestleMania is an economic force all its own. After WrestleMania 38 was held this past April in Arlington, Texas, Dallas Mayor Eric Johnson and Arlington Mayor Jim Ross said that the event earned the cities $206.5 million. And$25.4 million alone was spent on hotels and accommodations within the region.
The WrestleMania concept helped McMahon build a unified professional wrestling brand that is known around the world. Its programs can be viewed in more than 180 countries in 30 languages and on 1 billion television sets per week.
Building that brand with an incredible cast of personalities is part of the reason World Wrestling Entertainment (WWE) is worth $5.3 billion.
[As a fun side note, I got to know one of those personalities, Diamond Dallas Page.
A mutual friend introduced us because he thought we had a lot in common, so we had lunch together and realized we shared a lot of the same beliefs and principles about health and fitness.
You can see us together doing his signature gesture, the “Diamond Cutter.”
Now back to investing…]
As much as he did for the company, McMahon has retired amid investigations into allegations of misconduct. There are plenty of news outlets that cover the specifics of those investigations; and TradeSmith is focused on what this means for investors.
With McMahon as the driving force behind the company for so many years, WWE’s future looks uncertain. Even before McMahon retired, when President Nick Khan was asked whether the company would ever sell itself, he said, “We’re open for business.” And it’s been announced that McMahon’s daughter, Stephanie, and Khan will run the company as co-CEOs.
While there’s no guarantee that a sale will happen, what makes this such a unique situation is that our system says WWE is a stock to own on its own merits. The kicker is that it could be an acquisition target, and because there is no other company like this, it’s a once-in-a-lifetime opportunity for another company to own it.
Netflix, Amazon, or Disney could offer a premium from the current stock price that is too good for WWE to turn down.
The company is in our Green Zone, the stock is in an uptrend, and it has a medium-risk score of 26.82%.
WWE still rewards its shareholders with a small dividend payout, which currently has a yield of 0.65%. In addition, it’s also unique because of its signature content and its ability to generate revenue from live wrestling events.
Before COVID-19, WWE generated $125 million in revenue from 310 events. In 2021, the company generated $58 million from 101 events. With fewer restrictions on public gatherings, the company can start putting on more shows… and can generate more money.
WWE is a treasure trove of content that potential buyers could use to draw in new members.
[TradeSmith Investing Recap: WWE is a potential acquisition target for companies like Netflix, Amazon and Disney after the retirement of former CEO Vince McMahon. It pays a dividend with a yield of 0.65%, has a defensible moat (thanks to its content), is in our Green Zone and has a medium-risk score.]
P.S. Next Wednesday, Feb. 8, I’m going live to show off a game-changing technology that can help you make huge gains in any market. Luke Lango – who you may know as one of InvestorPlace’s analysts – is joining me, and together, we’ll show you how this technology could completely change your financial future… for the better. Save your spot here.