It’s May the 4th, making it the official Star Wars Day. It turns out that there may be at least some wisdom in movies. Though Star Wars is science fiction, and despite there being much in economic activity as a theme in the movies, there are many lessons for investors that can be learned from and used directly from Star Wars.
Before thinking this entirely a joke, please understand that the raw real-world economics of Star Wars had been about $30 billion, even before Disney bought the rights and ownership of Star Wars from George Lucas in 2012. That creates serious direct opportunities for investors, and it creates serious lessons around other thematic investing.
Obviously there are some tongue-in-cheek phrases and references here. And, admittedly, sometimes it is hard to take some things too seriously in life. Still, here are eight investing lessons, not in any particular order, that investors can take from Star Wars.
1. Disney Baby!
Walt Disney Company (NYSE: DIS) already owned Pixar and Marvel, but the company created a multi-generational slam-dunk victory when it spent $4 billion to acquire Star Wars. Our own speculation was that it would easily be a $30 billion or more gain for Disney, and the only thing that will change that is if real-life aliens ever arrive on earth. Star Wars will help Disney raise its dividend for a decade, and it is still a stock to own for the next decade. Disney shares were roughly $50 back when the buyout was announced in late-October of 2012, versus $110 or so now — and its $0.75 annualized dividend the following year is now $1.56 annualized.
2. Use the Force!
The Force in investing and trading is momentum, trends, whatever you want to call it. There is a saying that “The trend is your friend!” What this simply means is that if the market (or a stock) acts like it wants to keep rising, you don’t fight it and you stay in. If the market is acting like it wants to keep selling, you don’t want to fight the trend. You may have heard that there is always a bull market somewhere. That’s the force, at least for technicians.
3. Investing Can Be in Memorabilia Too!
Did you ever think about memorabilia as an investment? Go beyond baseball cards and comic books. There is a market worth endless money around the Star Wars genre, as well as other science fiction items. This can be movie props, comics, toys, games, limited edition items, autographs and on and on. The Star Wars site even had a getting started collecting area. Some of those old Star Wars toys you bought and wrecked as a kid could be worth hundreds (or thousands) of dollars today.
4. Lessons for CEO Credibility and Short Sellers
Overstock.com Inc. (NASDAQ: OSTK) CEO Patrick Byrne went off on a tirade against naked short sellers and a conspiracy to drive down his stock price more than a decade ago. He referenced a Sith Lord as a criminal mastermind from the 1980s that was trying to orchestrate lower share prices with short selling for Overstock. This caused a serious reputational blow at the time, and Mark Cuban and others became short sellers after the note. It took years for Byrne to get past the issue, but oddly enough he predicted the massive recession coming months before the real Great Recession ever arrived, and heeding his warning could have saved many investors had they listened to him. Anyhow, a CEO who wants to keep his or her credibility strong might want to avoid going off on unnamed people as evil Star Wars characters conspiring against their company. It probably will bring out more short sellers.