Amid a buzz of publicity, yesterday was the day that many Beatles fans had eagerly waited for, with the release of a new video game in the band’s name – “The Beatles: Rock Band.”

If you’re not familiar with the “Rock Band” concept, it’s a bit like karaoke, except you play music in addition to singing. Gamers follow along with their favorite musicians/songs, using an electronic drum kit and guitar, and sing the songs, too.

The game is enormously popular, having generated over $1 billion in revenue. And gamers can download individual songs, albums, or catalogs of groups like AC/DC, The Who and The Grateful Dead. So far, they’ve paid for and downloaded over 40 million songs…

Both Paul McCartney and Ringo Starr were part of the creative process and have endorsed the game in the ensuing media hype that developed.

But what about you and me? Well, while we might never be as wealthy as the “Fab 4,” perhaps we can profit from a new wave of Beatle Mania.

These “Fab Four” Stocks Are Set for a “Beatle Boost”

Let’s take a look at four companies that could make big bucks off the The Beatle’s Rock Band release…

• Viacom (NYSE: VIA.B): This firm should be the biggest beneficiary of the game’s success. Its MTV unit owns Harmonix Music Systems, the creator of “Guitar Hero” and several “Rock Band” titles, including “The Beatles.”

Viacom also owns cable TV staples such as Comedy Central, VH1, Nickelodeon and CMT. In addition, it produces and distributes movies through its Paramount Pictures division.

However, Wall Street likes Viacom about as much as conservatives liked Paul, John, George and Ringo’s mop-top haircuts in the 1960s. Analysts currently have eight “Buy” recommendations on the stock, 17 “Holds” and eight “Sell” ratings.

Keep in mind that most analysts rate stocks as “Buy.” A “Hold” essentially means sell, while an outright “Sell” rating means “this stock is so bad, even we don’t want the firm’s investment banking business.”

And note that Wall Street analysts have a horrendous track record when it comes to rating stocks.

So given my contrarian nature, I like stocks that have lots of “Hold” and “Sell” ratings, since analysts are often behind the curve and afraid to go against the grain. When a company turns around, they’re then forced to upgrade the stock and that often leads to gains in the share price.

And as for Viacom, the future doesn’t look as bad as they portray it. The company is expected to earn $2.05 per share in 2009, followed by a nearly 10% increase to $2.25 next year. In 2011, Wall Street projects earnings of $2.61.

The stock trades at just 12 times this year’s expected earnings, 11 times next year’s and just 1.1 times its trailing 12-month sales.

Viacom shares seem cheap. And if the game sells as well as I believe it will, shareholders will reap the reward.

• Sony Corporation (NYSE: SNE): Sony owns partial rights to The Beatles’ music catalog. That means every time a Beatles record is purchased, a song is downloaded, or a tune is played on the radio, Sony rings the register. The rights are held by Sony/ATV Publishing, a joint venture between Sony and Michael Jackson’s estate.

Of course, Sony has other businesses, too, aside from waiting for oldies radio stations to play Yellow Submarine…

It makes the ever-popular PlayStation video game consoles, on which users can play “The Beatles: Rock Band” (in addition to Microsoft’s X-Box and Nintendo’s Wii systems). Sony also makes a mass of other electronic equipment and is in the television and movie businesses.

Wall Street isn’t exactly enamored with the company at the moment. There are 12 “Buy” recommendations against 10 “Holds” and one “Sell.”

After a series of missteps, Sony isn’t expected to be profitable this year or next. But it does boast a strong film division and restructuring could result in its weak stock price rebounding.

• Electronic Arts (Nasdaq: ERTS): The company is the publisher of “The Beatles: Rock Band.” Like Viacom and Sony, Wall Street thinks it’s also going to be a Hard Day’s Night for ERTS. There are 14 analysts who believe the stock is a “Buy,” while 15 say, “Hold” and three have a “Sell” verdict.

In the face of stiff competition and few exciting new titles, Electronic Arts is expected to lose 30 cents per share this year. But in 2010, the books are expected to turn into the black, with the company projected to earn 97 cents per share, rising to $1.27 in 2011. In addition, it has over $2 billion in cash and no debt, and enjoyed recent success with its EA Sports Active.

The stock has suffered a beating, but has thus far failed to mount much of a rally, unlike many others who also took a hit in the downturn.

But should “The Beatles” and other games help turn things around, Electronic Arts might wind up being a great contrarian play.

• Gamestop (NYSE: GME): If you have a teenager, chances are they already spend Eight Days A Week browsing and playing games at Gamestop, a leading video game retailer in the United States, Europe, Canada and Australia.

The firm should benefit from increased consumer traffic related to purchases of “The Beatles,” plus a host of other games and accessories that it sells.

In contrast to the other three companies, Gamestop is much more popular, with analysts in giving it 14 “Buy” ratings and just two “Holds.” While earnings growth isn’t exactly stellar – EPS is estimated at $2.40 this year and $2.55 next year – the stock is cheap at 10 times this year’s EPS.

If you want to talk “best of breed” in the video game retailing world, Gamestop is it. Gamers can sell back or trade their games at Gamestop for other titles, which gives the company an advantage over retailers like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY). Plus, in addition to browsing the store, gamers can test-drive the games on the demo consoles and talk with employees, who are usually gaming enthusiasts, too.

Gamestop is gaining market share and is cheap enough to buy at current levels. If the upcoming holiday season is particularly strong, look for it to beat estimates and send share prices higher.

These four stocks have the potential to generate significant gains and put money in our pockets. And I hope we manage to make gobs of it. Just remember, money Can’t Buy Me Love.

Marc Lichtenfeld

Source: A New Wave of ‘Beatle Mania’… Four Ways to Profit from the Beatles: Rock Band

The investment world is splitting in half. Now, more than anytime in the last 18 months, the winners are diverging from the losers. No more does a single macroeconomic event steer the markets.

We are back to individual fundamentals and microeconomic themes. That means it is a stock-picker’s market.

Perfect evidence of this phenomenon comes from two companies with similar product offerings but widely divergent business models, GameStop (NYSE:GME) and Gravity (NASDAQ:GRVY).

Shares of GameStop are down by over 5% so far today as the Street digests the firm’s latest earnings figures.

With wary consumers unwilling to open their wallets, especially on non-essential items like video games, the company’s top line shrunk by 3.7% over the past three months.

The $1.74 billion in revenues translated into $38.7 million in second-quarter profits, a plunge of over 30% from the prior-year period. Making the figures appear even worse, same-store sales dropped by 14%.

The figures prove that growth was nowhere to be found, which is bad news as the company prepares to enter the critical shopping period that is the fourth quarter.

With chances of significant growth running slim, executives were forced to lower their earnings expectations for the remainder of the year. GameStop now estimates a full-year profit of $2.64 per share, down from its previous prediction of $2.93.

While GameStop may be representative of the nation’s consumer spending, it is not indicative of the kind of revenue-generating power held by some of the gaming industry’s strongest, leanest competitors.

When it comes to running a lean business, few can do it as well as the Asians, home of almost all modern efficiency practices.

While GameStop wonders where everybody went, a growing competitor, South Korea’s Global Gravity, is celebrating the fast-growth it has found in the online gaming sector.

Thanks to the drastically reduced costs and increased exposure of the Internet, Global Gravity is poised to take over as a planetary powerhouse in the gaming industry.

Size doesn’t matter

With its Ragnarok Online product soaring in popularity across the globe (it has strong exposure in 62 countries on five continents), Global Gravity shareholders are wondering what the future holds.

Today, they are getting a glimpse of the possibilities as shares of their company are surging ahead by more than 20%, thanks to a strong, intra-day volume spike.

The diverging pricing action between these competitors teaches us an important lesson. As I mentioned above, when the nation pulls out of a nasty recession, corporate fundamentals will become more and more important.

Margins, debt, free cash flow and market share will show the obvious difference between winners and losers.

We know consumers will not be dumping their savings accounts anytime soon. That means companies will be forced to stretch every dime of revenues as far as they possibly can.

Efficiency is not a wildly common concept here in the States. GameStop proves it. For companies based in Asia, however, it is not only a way of life, it is a means of survival.

Gravity may only have a market valuation of $69 million (compared to GameStop’s figure of $3.9 billion), but we all know it is not the size of your company that matters.

It is how you use it.

Source: International Small Caps: Size Doesn’t Matter

Source: Investment News Briefs Wednesday, June 24, 2009

If you want to invest in video games there are, essentially, four ways to do it…

• Investing in video game publishers.
• Investing in video game retailers.
• Investing in companies that make video game consoles.
• Investing in companies that make video game accessories.

Game Publishers

These are the companies that make the games. And Electronic Arts Inc. (NASDAQ:ERTS) and Activision Blizzard (NASDAQ:ATVI) are the best bets right now.

Electronic Arts is the publisher of the popular Madden franchise, which gives it a consistent intake every year. Adding to its arsenal with a game like Spore will no doubt boost its bottom line even further.

Activision Blizzard is another strong contender. Guitar Hero has proven extremely popular, as has World of Warcraft. And while the new Call of Duty probably won’t sell as well as its hugely successful predecessor, Call of Duty 4, it will no doubt turn a respectable profit.

Avoid THQ Inc. (NASDAQ:THQI), which seems to have forgotten what games are and Take-Two Interactive (NASDAQ:TTWO), which is overly reliant on its controversial Grand Theft Auto series. Take-Two also had a good opportunity to be taken over by the much larger Elecrtonic Arts, but a deal never got done, which raises questions about the company’s management.

Accessories

As the unrivaled success of the Wii showed, innovation in video game accessories can pay off. For every console, as well as the PC, there are multiple games that can be enhanced by the use of a new input medium.

Games such as Guitar Hero, a game where you use a guitar shaped controller to play along with music, Flight Simulator X – the premiere flight simulator game is greatly enhanced by the use of a joystick, and the Dance Dance Revolution series, which features games that are best played with a dance pad, are always emerging on the market.

While, most of the accessories are made by the company of the game that requires them, there are external controllers that are always there competing for the market. Some companies that make these include MadCatz Interactive Inc. (AMEX:MCZ), a peripheral company specializing in mainly console accessories and Logitech International (NASDAQ:LOGI) a Swiss company that specializes in mostly in PC peripherals.

Retailers

While many electronics stores and retailers sell video games, there are some specifically designed to do so. The biggest of these in the world is GameStop Corp. (NYSE:GME). GameStop stocks new, used and old games, as well as multiple accessories and consoles. The largest video game retailer in Europe is GAME Group PLC (London:GMG). They operate similarly to GameStop.

Consoles

More than $9 billion was spent on video game consoles last year. Nintendo, Microsoft, and Sony all have new systems on the market, and they’ve all proved formidable.

[...] All of these companies are reasonably solid investments, but, in terms of gaming, Sony Corp. (NYSE:SNE) and Nintendo Co. (Pink Sheets:NTDOY) look like they are going to have some very good years.

Sony has got an amazing games division that is producing very high quality games for its console.  And Nintendo is always going to be in demand, though it needs to start making more games for the Wii and DS.

Microsoft Corp. (NASDAQ: MSFT), on the other hand, needs to acquire more exclusives, plus this report has nothing to do with the upcoming Windows 7, which is the biggest part of Microsoft’s business.

Hon Hai Precision Industry Co.

Hon Hai Precision Industry Co. (OTC: FXCNF) is a technology company based in Taiwan. It manufactures the Mac mini, the iPhone and the iPod for Apple Inc. (AAPL), cell phones for Nokia Corp. (NOK), and motherboards for Intel Corp. (INTC).

Of course, it also manufactures PS2, PS3, Xbox 360, and Wii – the four most popular gaming consoles – making it a tremendous play on the video game industry.

Emerging Markets: The Future of the Gaming Industry

The Middle East, China, India, Africa, and South America all have extreme pirating problems where video games are concerned. Thus, most companies have trouble expanding into these markets.

The Chinese market is a rapidly growing area for video games. However, the video games that the Chinese are enjoying are not what the West is enjoying. Chinese consumers love MMORPGs. While an average Western MMORPG, like Everquest for example, will reach 500,000 users. An AVERAGE Chinese MMORPG will attract well over 1,000,000 users very quickly.

Of World of Warcraft’s 10 million subscribers, 1.5 million live in China. Analysts estimate that the WoW Chinese market, alone, could eventually have 10 million users.

Most Chinese play MMORPGs in internet cafés (since most of them have limited Internet access). A large percentage of Chinese, however, do play free MMORPG’s. Free MMORPGs usually are completely free to play, but players can pay money to expand the gaming experience (bigger map to play on, more areas etc.) or improve their character (items, weapons character stats, etc.). While this doesn’t seem to like it would make a lot of money, it actually does, thanks to the addictive nature of most MMORPGs.

Some of the bigger names in the Chinese MMORPG market are Giant Interactive Group Inc. (NYSE:GA), Perfect World Co. Ltd. (Nasdaq:PWRD), Shanda Interactive Entertainment Ltd. (Nasdaq:SNDA), and The9 Ltd. (Nasdaq:NCTY).

Unfortunately, China is China. As such, the government always thinks of something ‘imaginative’ to do with the gaming market. The ‘Fatigue System’ is a means by which the government gets to control how long its citizens spend online playing games.

This system requests that games stop rewarding players after three hours of play in one day. Additionally, the system also requests an ID for players so as to be able to control their play more easily. While the system was originally meant for all gamers, it has been limited to gamers under the age of 18, due to the initial outcry it garnered.

China is also notorious for having the largest game sweatshop industry in the world. A game sweatshop is where a person is paid to play a game intensively and to make an extremely good character in it. That character is then sold to whomever wants it.

Chinese censorship is surprisingly low as the government only censors games that are anti-Chinese or portray Tibet and Taiwan as independent nations.

India’s market has yet to fully realize the potential of video games (putting the pirating aside). India is regularly compared to China in 2001. The online video games market is picking up but the overall market is still small. The few Indians who do game, do so like the Chinese: in Internet cafés. Unfortunately, there aren’t any enormous MMORPG makers (or equivalents) in India, yet.

The Middle East is generally also a pirating heaven though there are some legitimate shops usually selling games that haven’t been translated. Countries like Saudi Arabia also tend to ban certain games that are conceived as anti-Muslim.

If you wanted to invest in one of the Chinese MMORPG makers, the one that looks the best thanks to its pricing model and quality of games is Giant Interactive.

PS. This is an excerpt from a three-part guide to investing in the video game industry. For the complete version, please go to Money Morning’s archive pages.

Source: The Investor’s Guide to The Video Game Industry – Page 2

In the company’s Monday release, Circuit City said it is closing stores in 55 metro areas and will exit 12 markets entirely. It also said it is reducing future store openings, “aggressively” renegotiating current leases and considering “all available options and alternatives to restructure its business.”

The release also throws a lot of blame, citing “waning consumer confidence,” a “significantly weakened retail environment” and “unfavorable macroeconomic conditions.”

Circuit City also said it is waiting for nearly $80 million tax rebate it believes the federal government owes the company.

That figure is nearly twice its shrunken market cap.

“Since late September, unprecedented events have occurred in the financial and consumer markets causing macroeconomic trends to worsen sharply. The weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendors,” James A. Marcum, vice chairman and acting president and chief executive officer, said in the release.

“The combination of these trends has strained severely our working capital and liquidity, and so we are making a number of difficult, but necessary, decisions to address the company’s financial situation as quickly as possible.”

Missing from his statement is the fact that the electronics industry has widened over the past decade – growing popularity of DVDs, video games, HDTVs computers and laptops, cell phones – spawning new competitors such as GameStop Corp. (GME) and Apple Inc’s (AAPL) iTunes in addition to its chief rivals Wal-Mart Stores, Inc. (WMT), Target Corp. (TGT) and Best Buy Co., Inc. (BBY).

And those other companies are doing a much better job pushing the same merchandise off their shelves than Circuit City.

Uphill Battle

To gauge how steep an uphill battle Circuit City has, it helps to look back key moments in its decline.
Over the past year and a half, the company has slashed retail management positions, eliminated jobs at its corporate offices and laid-off 3,400 retail workers.

On March 28, it was ousted from the Standard & Poor’s 500 Index.

The following month, Blockbuster Inc. (BBI) – another fading national company – made an unsolicited $1 billion acquisition bid for Circuit City for at least $6 a share. The idea was to create a supermedia retailer that might be more competitive.

That offered fizzled.

In May, the company put itself on the auction block, a day after Best Buy announced plans to open stores in Europe through a $2.1 billion 50-50 joint venture with London-based Carphone Warehouse Group PLC.

In June, it suspended its 4-cent dividend. And in September, CEO and President Philip Schoonover resigned on the spot.

All that carnage has caused Circuit City’s stock tofall 99% in the past year and a half – from about $30 a share to its current price of 36 cents a share.

Source: Battered Circuit City Closing 155 Stores, Scraping for Capital

• General Motors Corp. (GM) announced yesterday (Thursday) it plans to invest $500 million in an Ohio plant that will be retooled to produce the smaller, gas-efficient Chevrolet Cruze. The half-billion dollar project is part of GM’s commitment to focus on smaller models in response to high gas prices. The Lordstown, Ohio plant will begin manufacture of the Cruze in 2010, MarketWatch reported.

• Shares of video-game retailer GameStop Corp. (GME) fell to $41 before recovering to close down just 4 cents yesterday (Thursday) at $43.48. GameStop, the largest global video-game retailer, reported fiscal second quarter net income of $57.2 million, or 34 cents a share, up from $21.8 million, or 13 cents a share, for the same period the year prior. But shares dropped on fears that weakening consumer demand in the United States would hurt future video game sales, The Wall Street Journal reported.

• Schaeffler Group bought a majority stake in Continental AG (OTC ADR: CTTAY) with a $17.9 billion (12.1 billion euros) deal, which will create the world’s largest car-parts manufacturer, Bloomberg News reported. Schaeffler raised its offer 7% to win over the German tiremaker.

• U.K. retail stores had a surprising gain in July of 0.8% after a decline of 4.3% the month prior, the London-based Office for National Statistics announced yesterday (Thursday). Sales were highest at bargain retailers. Bank of England Governor Mervyn King said the British economy faces a “difficult and painful adjustment” as the combination of a weak domestic housing market and rising inflation drag on consumer spending, Bloomberg News reported.

• Oil prices shot up more than $5 a barrel yesterday (Thursday), rising to the highest level in over two weeks as tensions in oil-producing regions escalated and the dollar declined. Light, sweet crude for October delivery jumped $5.62 to settle at $121.18 a barrel on the New York Mercantile Exchange after earlier rising as high as $122.04, crude’s highest trading level since Aug. 4.

• Lehman Brothers Holdings Inc (LEH) was raised yesterday (Thursday) to “buy” from “neutral” by Ladenburg Thalmann & Co analyst Richard Bove, who said the Wall Street investment bank could become the target of a hostile takeover bid, Reuters reported. “The market is at a stand-off,” Bove wrote in a note to investors. “Investors are unwilling to accept any positive view of the company; management is unwilling to sell out at a deeply distressed value. The stage is set for a hostile bid to take over the whole company.”

• The number of U.S. workers filing new claims for jobless benefits fell for the second week in a row last week, the Labor Department said yesterday (Thursday). Initial claims for state unemployment insurance benefits dipped by 13,000 to a seasonally adjusted 432,000 in the week ended August 16 after falling a revised 12,000 a week earlier.

• Burger King Holdings Inc (BKC) said yesterday (Thursday) that net income rose to $51 million, or 37 cents per share, in the quarter ended on June 30, up from $36 million, or 26 cents per share, a year earlier. Total revenue rose 9% to $646 million. Sales at stores open at least a year rose 5.3% worldwide.

Source: Global Investing Roundups Friday, August 22nd, 2008

I can’t.  It seems like just a few days ago (OK, maybe a few months) that my father walked into the house with a big Nintendo box.  I played Duck Hunt until my fingers hurt.

At the time, the video game industry was just starting out.  It wasn’t the $18 billion machine it is today.  And at the time, no one ever thought that the opening day of a video game release would ever outperform opening day of a “must-see” movie.

But guess what?  Halo 3 – a videogame from Microsoft – has the number one entertainment opening day sales on record.  That’s right; it outperformed Spider Man and Star Wars.

That’s why I simply had to answer Ashley A’s e-mail when I saw it.  She asked:

Charles, I’ve been riding GameStop for a long time.  But with the recession and all, I have no idea if I should expect them to slide. What do I do?

Well Ashley, you’re in strong company.  GameStop (GME) recently released record earnings and they expect this to continue into this year.

Honestly, this is one of the only companies I feel safe getting into, even with the recession around the corner.  The truth is, a slew of hot titles will get released this year, pumping sales up even more.  And people are still buying Nintendo Wiis, Playstation 3s, and Xbox 360s in record numbers.  So console sales should continue to rock this year, too.

All this paints a pretty picture for GameStop.  So I recommend that you ride this thing for as long as you can!

P.S. Want to see me cover a stock?  Send an e-mail to feedback@investorsdailyedge.com