Earlier this week, the Stocks Under $20 portfolio made its first sale. The portfolio sold its entire stake in Dreamworks Animation (NASDAQ:DWA), as shares hit past the $25 level. If you have followed the portfolio or read the background, all positions are exited when they hit $25 a share. In this case, shares were higher than that level due to buyout buzz.
Softbank, one of the largest companies in Japan, was rumored to be buying shares of Dreamworks Animation at the $32 level. The deal would have given Softbank access to the U.S. market and a huge portfolio of movie characters that it could use and integrate into its company.
Softbank is best known in the United States after purchasing an 80% stake in Sprint. Softbank made headlines recently with its stake in Alibaba (NYSE:BABA) finally monetized. The company received $4.6 billion in proceeds from the IPO and still holds a 32% stake worth $71 billion.
The deal for Dreamworks Animation makes sense for Softbank as its leadership in mobile games could benefit from the plethora of characters coming in. Softbank is the world's top grossing publisher of mobile games.
Also Dreamworks expansion in Asia via its Oriental Dreamworks platform is bringing live action, television series, and theme parks to the Chinese market. This close proximity for Softbank could be a huge boost for the company.
On news of the buyout buzz, shares of Dreamworks Animation traded as high as $28.18. Shares were trading down on Tuesday as buzz has dropped and reports that Softbank may be walking away surface. Despite the buyout rumors of $32 a share, the company still trades below that level and well below its 52 week high of $36.01.
My blog post on Dreamworks Animation and its subsequent addition to the portfolio centered on the company having strong growth in consumer products and being a mini-Disney. After reporting a weak second quarter report, shares fell low enough to enter the criteria to be added to the portfolio.
I also highlighted the strength in the television segment and the future growth ahead. Dreamworks Animation is ready to add three new shows in the second half of the year. In 2015, Dreamworks will have seven new shows and will see around $250 million in television revenue, with margins of around 30%.
The stock was held for just under 60 days. In that short time, the trade returned 33.8%. Shares were bought at $19.52 for the portfolio. That price of $19.52 was close to the 52 week low of $19.20 shares had seen. I called the bottom and told investors this was a rare opportunity to add the media gem to portfolios under $20.
Dreamworks Animation shares are out of the portfolio and its likely shares won't drop below $20 anytime soon so they can be added back in. Have no fear though as I have found another great media company that is going unnoticed by large investors and analysts. The company is set to see explosive growth with several catalysts that capitalize on the biggest growth areas in the movie market. To find out this pick and get other great stocks under $20, be sure to subscribe to the portfolio and get full access.
Thanks and happy investing.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.