It never ceases to amaze me how smart people just don't tie the real world into investing to foster long-term wealth creation.
By now, I am not surprised that folks shelling out $200 for the latest Nike (NKE) Jordan sneakers every quarter don't own a lick of the sneaker giant's stock. Not only are they unlikely to own a lick of the stock, but have had zero thought about what expensive Nike Jordan sneakers mean to the company's bottom line. Hell, I would wager that most who rock Nike Jordan sneakers to the gym for a pickup game don't even realize you could buy stock in the company.
Well, now is the golden opportunity to right your wrongs, people, and invest in one of the biggest franchises of all-time: Star Wars. What I saw on Force Friday at retailers was a coordinated attack, years in the making, to suck as much money from the pockets of households as possible. Social media came alive to drive interest in products sourced from overseas. There were dedicated spots in major retailers such as Target (TGT), Wal-Mart (WMT) and Toys R Us devoted to light sabers and Lego sets.
Here is a basic overview of the past three days of Star Wars product mania:
Marketing: The marketing blitz was handled very impressively by Disney (DIS), Hasbro (HAS) and Mattel (MAT). The amount of people behind the scenes focusing on Star Wars at the toy companies was dramatic, and it was pulled off almost without a hitch. The companies drove crazy buzz across all media -- social, the actual mall and retail stores. I think what these companies have done is planted the seed in the minds of collectors and families that to get their hands on the best Star Wars gear, they have to strike early as shipments arrive (and keep checking online). And that is great news as it suggests more full-priced sales in an industry fighting for margin in the online world.
Movie interest: The interest in Star Wars the movie must be very, very strong if shares of toy makers and retailers are to justify high expectations for related products. I think Force Friday showed that opening weekend for Star Wars will set a mind-blowing record for worldwide gross receipts. Whatever number you are thinking in terms of opening weekend box office dollars, multiply it by three times or more. Importantly, I believe Disney is going to create the next generation of Star Wars fans before the year is out. And that bodes well for the toy industry in early 2016 as gift cards are redeemed.
Actual toys: The toys that were on the market for Star Wars are some of the funniest related to a movie in some time. Giant action figures, intricate Lego sets and the introduction of technology such as flying Millennium Falcons helped to drive interest among collectors and more casual fans. The toy industry, I believe, is going through a mini-revival, and Star Wars is being used as a place to show off advances in design and general fun. The innovation I am seeing leads me to believe the toy companies have a strong product pipeline for 2016 and 2017, which is necessary if the likes of Mattel and Hasbro are to compete with Apple (AAPL), Google (GOOGL) and GoPro (GPRO) gadgets. (Target, Apple and Google are part of TheStreet's Action Alerts PLUS portfolio.)
So the million-dollar question is how to invest in the looming movie blockbuster after the primary names have skyrocketed since the start of the year. I think you have to go with the toy makers such as Hasbro (first choice) and Mattel (second choice, it's a company in turnaround and with less Star Wars exposure). On the flip side, I would be hesitant to play video game manufacturers other than Electronic Arts (EA) -- some of these Star Wars toys for older kids are pricey, and could steal sales from the video game sector.
Disney gets roughly 10% of its operating profits from consumer products, and is an obvious beneficiary of Star Wars mania (movie release, plus products). But I think the stock's potential could be held back a bit due to concerns on cord cutting and demand at overseas theme parks.
As for food companies trying to capture the attention of parents and kids by putting Star Wars on the outside of packages? Don't be reeled into the hype -- Star Wars photos are unlikely to drive more sales of soup or grapes.