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Now, I am sure you have seen it all, a company that promotes Grand Theft Auto is our featured Long Term Power Rated stock this week? This company promotes the fantasy of auto theft, along with fighting bullies, being hunted by mad scientists, playing professional tennis, and several other flights of the imagination. If you haven’t guessed, the company is Take-Two Interactive (TTWO | Quote | Chart | News | PowerRating), the owners of Rock Star Games and 2K.
This worldwide leading video game creator, publisher, and distributor has recently earned a 9 Long Term Power Rating in a sector that also garnered a 9 rating. Our long term, statistically valid studies have clearly shown that stocks with a 9 rating possess a 79.1% chance of being higher one year later.
This testing was done over the last 12 years, across most market conditions and has proven itself to be a reliable measure of the future performance potential of stocks.
Let’s take a closer look at Take-Two Interactive. They are a New York City based company with development studios, marketing, and distribution centers located worldwide. The company is in the midst of a takeover battle worthy of the aggressive video games it promotes.
The giant gaming company Electronic Arts (EA | Quote | Chart | News | PowerRating) has made a $2 billion hostile offer which was just dropped with EA agreeing to meet with TTWO to review its financial information. TTWO rejected EA’s initial offer in February, believing it was too low.
TTWO has been in a downtrend since June, but is up about 29% for the year. The Feds are looking at the buyout as a potential antitrust violation which only increases the drama in an already video game style situation.
The good news is that TTWO posted its first quarterly profit in over two years in June. This is due to the stellar success of Grand Theft Auto IV, which earned over $500 million the first week of release in April. If you take a look at the daily chart, price dropped dramatically after the offer was withdrawn, however, it appears to be bouncing back up from the lows.
The Weekly chart shows a clearer picture of the situation.
A fat gap up in the beginning of the year in line with the initial offer from EA then very little reaction to the huge sales success of the new version of Grand Theft Auto. A slight uptrend is all that is evident to reflect this in price. Price has spiked slightly over the last 2 full weeks and has sold off a bit this week thus far.
This company is constantly innovating, may be able to stay independent or obtain a higher buy out offer, and owns the leading properties in the video game world. These facts combined with the Long Term Power Rating of 9 make Take-Two Interactive a compelling choice for your long term portfolio.
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David Goodboy is Vice President of Marketing for a New York City based multi-strategy fund.
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