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A few funds love movies
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March 15, 2001: 7:20 a.m. ET
Studio stocks add some spice to a small group of mutual funds
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - Fund manager Bill Fries is no film buff, but he likes what 20th Century Fox is doing for his portfolio.
And while Fries won't be making any predictions for March 25's Academy Awards, he's betting the maker of Oscar-nominated picture "Castaway" will help make Thornburg Value Fund a big star on the performance charts.
 Thornburg Value, with about $1.8 billion in assets, has about 2 percent of its portfolio in Fox (FOX: Research, Estimates), owner of film heavyweight 20th Century Fox.
"You're buying more than just films and entertainment when you buy Fox," Thornburg said. "But films are an important component."
Of course, studio stocks are pretty much a fringe investing theme for most mutual fund managers.
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 INVESTING IN THE MOVIE BUSINESS
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20th Century Fox (Fox)
Miramax (Disney)
New Line Cinema (AOL Time Warner)
Sony Pictures
USA Networks
Universal (Vivendi)
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Few movie companies are publicly traded – and the ones that do hit Wall Street's radar screen are units of much larger media conglomerates like Disney's Miramax, Vivendi's Universal, or AOL Time Warner's New Line Cinema (AOL Time Warner is the parent of CNNfn.com).
"I can't think of many managers who like studio stocks," said Scott Cooley, an analyst at fund-tracker Morningstar. "It's a business with pretty uncertain returns. You can lose your shirt making a handful of movies."
Many of the big media stocks have been hit hard by a slowing economy, the dot.com implosion and a drop in advertising rates, among other reasons, Cooley said.
Click here to check the studio stocks.
You'll find the stocks sprinkled in large growth funds like Janus Twenty, large value funds like Thornburg Value, communications funds like Gabelli Global Telecommunications, and socially-responsible funds like Pax World Balanced Fund, according to figures from Morningstar.
Communications funds tracked by Morningstar also invest in film studios and media stocks, Morningstar said. The category, hit hard with the rest of the market this year, is down an average of 20 percent year to date as of March 12, Morningstar said.
Check your mutual funds on CNNfn.com.
"These are cyclical stocks," Cooley said. "When the economy slows, investors get out."
Martha Locke, an analyst at Eaton Vance, said a studio business rarely moves its underlying stock. One exception was the blockbuster success of "Titanic," produced by Paramount and distributed by Paramount and 20th Century Fox, according to the Internet Movie Database.
"A big portion of movies lose money," Locke said. "It's a very difficult business. It's very costly to make and market these movies. It's very easy to lose a lot of money."
Click here for CNN.com's special report on the Oscars.
Movie companies are making fewer movies, and they're trying to limit high production costs and big star salaries, Locke said.
Locke declined to name any studio stocks Eaton Vance owns. The fund family does not comment on stocks it is "active in." But according to Morningstar, Eaton Vance Information Age Fund owns Vivendi, AOL Time Warner (AOL: Research, Estimates), and Viacom (VIA: Research, Estimates), owner of Paramount.
Fries, of Thornburg Value, said more than one-third of Fox's earnings in the third quarter of 2000 were from its film and entertainment unit. The company's earnings before interest, taxes, depreciation and amortization (EBITDA) were $396 million in that period, including $151 million for its films and entertainment, he said.
"That's pretty important," Fries said.
The Thornburg fund, suffering with the rest of the market, is down 6 percent as of March 12, compared with an average loss of 10 percent for other large blend funds, according to Morningstar.
And whether or not Castaway wins any prizes on Sunday, an Oscar is no harbinger for investors, Fries said.
"It's probably not a good reason to buy a stock," Fries quipped.
-- Check CNNfn.com next week for a special report about the Academy Awards, The Business of Oscar. 
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