Paramount Global (Nasdaq: PARA) is a global media titan. Its consumer brands include CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, BET, Paramount+ and Pluto TV, and it has a massive library of television and film content. With its stock recently down more than 40% from its 52-week high, it’s looking like a compelling investment opportunity for long-term investors.
Paramount’s many outlets for distribution justify the company’s spending and give it the flexibility needed to produce high-quality content. In 2022, the company boasted six No. 1 theatrical films. Its blockbuster film “Top Gun: Maverick” came out in theaters in May and grossed roughly $1.5 billion globally across its theatrical run. It then went on to be a significant draw on the company’s Paramount+ streaming platform after its release there late in December, becoming the platform’s biggest-ever debut in terms of viewership.
In the fourth quarter, sales for the Paramount+ streaming service rose 81% over the prior-year period. A year ago, Paramount estimated that it should be able to reach more than 100 million streaming subscribers and more than $9 billion in direct-to-consumer revenue by 2024. Meanwhile, it’s restructuring its streaming business.
Because it’s rapidly gaining ground in the streaming space and still serving up income from its theatrical and TV media segments, Paramount Global is worth a closer look. Moreover, Paramount stock pays a dividend, recently yielding a hefty 4%.
Ask the Fool
Q. When one of my stock holdings doubles in value, would it be smart to sell it and buy a different stock? – C.T., Rochester, Minnesota
A. Not necessarily. Investors should always be looking forward, not backward. So don’t focus on how well or poorly the stock has done so far. Instead, think about how you expect it to do from this point on. Try to determine how overvalued or undervalued you think the stock is, and what you think of the company’s growth prospects, competitive strength, financial health and so on.
Doubling your money is great, but the best stocks will double in value many, many times, and you might miss out on real gains by selling too soon. If you’re not that confident, though, you might indeed sell – or strike a compromise and sell just some of your shares to lock in some gains.
Here’s a warning, though: If the stock has grown so much that it now makes up a big chunk of your portfolio’s total value, consider selling at least some shares. Even seemingly unstoppable stocks can head south sometimes, and you don’t want to get burned if your largest holding crashes.
Q. What’s “arbitrage”? – S.B., Tulsa, Oklahoma
A. It’s when investors take advantage of temporary price differences across markets.
For example, Carrier Pigeon Communications (ticker: SQUAWK) might be trading at $75 per share on a United States stock market and at $75.10 per share on a foreign market. If you simultaneously buy some of the lower-priced shares and sell the same number of higher-priced shares, you’ll net 10 cents per share (not counting any commission costs). Arbitrageurs usually invest very large sums to make this worthwhile.
My dumbest investment
My worst investment ever was buying shares of Kmart. – T.T., online
The Fool responds: Lots of investors have been burned after investing in Kmart – a sad reminder that even the most well-known, well-loved and successful companies don’t always stay that way.
Kmart started in the late 1800s as the S.S. Kresge Co., becoming a small chain of five-and-dime discount stores. By 2000, there were about 2,200 Kmart, Big Kmart and Super Kmart stores in the U.S. and its territories.
Kmart had trouble competing against Walmart and others, though, and ended up filing for bankruptcy protection in 2002. It survived that, and in 2005, bought Sears, Roebuck & Co., which had also been struggling, renaming itself Sears Holdings Corp.
In a tough retail landscape that featured strong competitors such as Walmart, Target and Amazon, Sears Holdings also struggled, and its CEO received heavy criticism. The company filed for bankruptcy protection in 2018. Bankruptcies such as these tend to leave shareholders with nothing.
As of last year, there were just three Kmart stores left operating in the U.S.: in Westwood, New Jersey; Bridgehampton, New York; and Miami. So watch out for red flags such as shrinking revenue, earnings or market share. The best way to protect yourself as an investor is to keep up with your holdings regularly, to make sure they seem to be on track and growing.
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