Nov 142011
 

This idea came to me after watching an episode of The Big Bang Theory in which Leonard and Penny bicker about which movie they should see. Morale of that episode seems to be that guys are willing sit through boring movies with their girlfriend if it means they can score afterwards. I did a little research on the whole film distribution business and found that Cineplex Inc (TSE:CGX) practically has a monopoly in Canada.

After further scrutiny I put about $2000 into this company. I purchased 80 shares at $25.28/share. I think this will be a very good investment in the long run. They serve over 70 million guests every year and operate all the largest theaters in the country like Famous Players, SilverCity, Scotiabank Theatres, and IMAX. They make serious doe from concession sales as well. 85% margin on popcorn and drinks! And they are still growing and opening up new locations.

Their financials hold up nicely too. A long track record of solid earnings, a 5% dividend yield, and 50% payout ratio. What does that mean? Well, even if the economy and Cineplex’s earnings stagnate forever then one year from now this company will still be worth 10% more than today. Even if it drops in the short term, no big deal, I’m getting paid $100 in cash every year just for holding on to it. Patience begets wisdom. Or was it the other way around?