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Put a Little Humor in Your Portfolio with National Lampoon
By
Michael Brush
December 15, 2005
Just about any baby boomer who ever harbored a youthful, rebellious spirit
will forever treasure a favorite quip or two from National Lampoon (NLN)
– the one-time cutting edge humor magazine from the 1970s that helped launch
more than a few spectacular comedy careers.
Now that these boomers are pushing middle age the magazine itself is just a
memory, shut down long ago. But the company lives on. And perhaps as a
fitting sign of the times it is now run by a former venture capitalist and
an ex-tax software producer, of all things.
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Is this a good thing? After all, how funny can they be?
It turns out they’re not too funny, by their own admission. But then they
maybe they don’t have to be.
After all, they can leave the writing to a network of independent
freelancers and producers who now create web site content, TV shows, films
and books that carry the National Lampoon moniker.
Meanwhile the relatively new guys in the corner offices at National Lampoon
can continue to work in the background on business deals that will open up
new avenues for the comedy writers – in essence exploiting the National
Lampoon brand like it’s never been exploited before.
Some of the potential ventures in store include: a national cable comedy
channel, more movies, and radio.
It’s all part of a game plan that Merriman Curhan Ford analyst Eric Wold
believes could turn this little-followed stock – which recently traded for
about $2.75 -- into a ten-bagger or more over the next several years. That
seems ambitious, but here’s how it might get there.
Creating a media company from a brand
For much of the last decade, National Lampoon, the company, was on cruise
control – doing little more than ringing up royalties from well-known,
perennial hits like National Lampoon’s Animal House and National Lampoon’s
Vacation. In 1999 it launched a website which caught the attention of Daniel
Laikin, a former venture capitalist who once specialized in funding tech
companies at Four Leaf Partners.
Laikin, who got wealthy in the venture capital business, bought a lot of
National Lampoon stock and voted himself on the board. Then along with some
allies he took control of the company in 2002. Now they own about 55% of the
stock and Laikin is assisted at the helm by president and finance chief
Douglas Bennett, also in his 40s, who used to work with a major tax software
vendor.
Earlier this month National Lampoon stock fell from around $4.50 a share to
$2.15 to $2.60 where Laikin stepped up and bought about $250,000 worth. To
be clear, that’s just a drop in the bucket compared to Laikin’s roughly 40%
personal interest in this $18 million market-cap company. But I’ll take the
recent buying, and Laikin’s massive personal stake, as bullish sign for the
stock.
“We have been doubling revenue every year for the last coupe of years, and
we plan to continue to do that,” Laikin told me in an interview this week.
“Look at the underlying value of the intellectual property the company owns.
We have thirty five years of intellectual property in the magazine archives,
a library of content that was written by the major comedy writers of our
time.”
National Lampoon’s two biggest film hits -- National Lampoon’s Animal House
and National Lampoon’s Vacation – originated as magazine pieces, in that
archive. And Laikin thinks there’s more content in there to convert into
movies, for example.
In the meantime, the company is turning to pop icons like Paris Hilton to
try to grab some of the country’s movie spend. She will be in a National
Lampoon release called National Lampoon’s Pledge This scheduled to open in
early 2006. It’s billed as a modern version of Animal House, in which Hilton
stars as a sorority president dealing with a group of unconventional
freshmen who want to pledge her house.
The financial mechanics behind the movie are typical of what National
Lampoon hopes to keep hashing out in film. It takes a cut of the revenue
from distributors, in exchange for use of the National Lampoon brand. But at
the same time the company doesn’t risk any capital by investing in film
production. Yet it maintains creative control.
Cable guys
But the real boost for this stock – what would help Merriman Curhan Ford’s
Wold see his ten bagger – could come from Laikin’s hoped-for launch of a
national comedy channel. “One of our biggest opportunities is to build a
cable comedy channel,” he says.
Here, Laikin will be building on his company’s National Lampoon Networks --
a TV network that reaches about 4.8 million viewers on about 610 college
campuses. It produces programs like Collegetown USA, National Lampoon’s
unofficial guide to colleges, and Reality Bar Crawl, which probably needs no
description.
National Lampoon also has a travel division of all things; National Lampoon
Clubhouse which creates direct-to-DVD feature films for “tweens” (8-12
year-olds); and a publishing division turning out books.
“Over the next few years, we believe management has a significant
opportunity to transform National Lampoon from what was until recently a
passive holder of a powerful brand into an aggressive media company — one
that is capable of monetizing this brand over a variety of platforms to
better reach the target audience,” says Wold, of Merriman Curhan Ford. In
the near term, Wold projects Lampoon revenue will double to $7.9 million
next year from $3.8 million this year.
The bottom line: National Lampoon is a solid brand in the
entertainment field. But the company now lacks star-power comics like Chevy
Chase or John Belushi who were once responsible for the pizzazz that helped
build the Lampoon brand. Plus, there’s no shortage of humor outlets on
cable, radio and the Internet these days. So buying shares in this company
is a somewhat risky bet that Laikin and his partners can wring more money
out of the Lampoon brand despite these challenges. Who knows if they can do
it. But Laikin is certainly putting his money where his mouth is – and that
is what investing along with the insiders is all about. So I’d say the stock
deserves a position in a well-diversified portfolio, right at these levels.
Disclaimer
At the time of publication, Michael Brush did not own or control shares in
any of the companies listed in this column. Mr. Brush is an independent
columnist for this web site.
For more on Insiders Corner disclosure, see the disclosure section in About
Insiders Corner:
http://www.investorideas.com/insiderscorner/. InvestorIdeas.com
Disclaimer:
www.InvestorIdeas.com/About/Disclaimer.asp. InvestorIdeas is not
affiliated or compensated by the companies mentioned in this article.
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