For many, Viacom (NASDAQ: VIAB ) stock has been a disappointment over the past year:
VIAB data by YCharts
Should we expect more losses in the year ahead? I'm not so sure. And yet if the chart above shows anything, it's that investors prefer big-name franchise owners such as Disney (NYSE: DIS ) and Time Warner (NYSE: TWX ) . Viacom is still in the early stages of developing new properties to accompany Transformers.
Giant robot seeks friend
The company's partnership with Hasbro has been especially lucrative. Over four movies, Paramount Pictures' Transformers franchise has earned more than $3.7 billion at the worldwide box office -- just over $750 million on average -- and another $682.9 million in home video sales before accounting for Transformers: Age of Extinction.
By contrast, Disney's Marvel Studios has managed to produce $703 million in average worldwide box office grosses over 10 movies. Giant robots (for now) are beating superheroes, which may explain why Paramount wants as much of director Michael Bay's time as it can get.
In July, the studio added three years to an existing agreement that gives Paramount first crack at funding Bay's newest projects. That includes a June 2016 follow-up to this summer's Teenage Mutant Ninja Turtles, which Bay helped shepherd through his production company, Platinum Dunes. Mikey, Leo, Raph, and Donny -- as the talking turtles call themselves -- have taken in $342.1 million worldwide as of this writing.
"With an ever-growing, worldwide fan base, Michael is truly one of the most inspired and beloved filmmakers of our time," said Brad Grey, Paramount chairman and CEO, in announcing the deal (via The Wrap). "We take great pride in the fact that Michael is part of the Paramount family and we look forward to growing our productive and successful partnership."
A howler of a franchise
While Paramount is a meaningful contributor to Viacom's revenue, Media Networks is what produces profits. Cable operations such as MTV and Nickelodeon account for two-thirds of revenue and nearly all of the company's operating income.
TV franchises deserve much of the credit, and at least one is heading for a bigger stage. In February, the animated inhabitants of Bikini Bottom will make their big-screen debut in SpongeBob: Sponge Out of Water, adding to a franchise that has generated at least $8 billion merchandising revenue over its 15 years on Nickelodeon.
Over at MTV, Teen Wolf has proven to be a durable performer and a favorite among the crowd at San Diego Comic-Con. Viewership tends to run between 1.5 and 2.5 million per episode. Season four's finale drew 1.54 million viewers on Sept. 8, leading the network to order 20 more episodes for season five.
Teen Wolf is a fan favorite and a hit among on-demand viewers. Credit: MTV
While that might not sound like much, on last month's earnings call, Viacom chief Philippe Dauman explained the long-tail nature of this sort of cable programming:
Across Viacom's networks, total video consumption of our full episode programming has grown year-over-year, with a number of our series seeing dramatic lift when you factor in time-shifted and on-demand viewing. Take MTV's Teen Wolf for example, a show with a very tech-savvy audience, an entire online and social media culture onto itself. Live-plus-same-day ratings for the just-completed cycle of Teen Wolf were up 18% among all viewers over the show's debut season in 2011. But when you factor in all measured screens, the total audience of the show is up 38% over the same time frame.
Source: S&P Capital IQ
Viacom stock could pay off over the long term
How soon we'll see Viacom's various franchise bets pay off isn't clear. In the meantime, investors can take heart knowing that the stock is cheap compared to peers. S&P Capital IQ has Viacom trading for 14.2 times trailing earnings and just 12.6 times estimated profits, versus 16.1 and 18.1, respectively, for Warner and 21.3 and 19.7, respectively, for Disney. Successful franchise bets could help to close the gap, delivering huge returns to current shareholders in the process.
Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple.
Fund holdings in the financials, health care and industrials sectors outperformed those of the benchmark and were among the strongest contributors to relative performance.Shire PLC (LSE:SHP) and Haci Omer Sabanci Holding AS (IST:SAHOL) were among the most significant individual contributors to fund performance during the quarter (2.08% and 1.88% of total net assets, respectively.)Shire (LSE:SHP) is an Irish-based global specialty biopharmaceutical company. The company's stock price rose as it was the object of a takeover bid by a US drugmaker.Haci Omer Sabanci (IST:SAHOL) is a conservatively managed Turkish holding company, of which Akbank T.A.S. is the largest holding. During the second quarter, shares of Haci Omer Sabanci rebounded strongly from a deeply sold-off position at the end of the previous quarter. Improving senti! ment toward Turkey and emerging markets in general drove the stock's rally.Stock selection in the consumer discretionary sector was a key detractor from relative results. An underweight in consumer staples, a sector we still consider overvalued, hurt relative results as well. However, the consumer staples stocks the fund did hold outperformed the index sector.A higher-than-average cash position during the quarter was a drag on results.Balfour Beatty PLC (LSE:BBY) was one of the largest individual detractors from fund performance during the quarter (0.69% of total net assets). Balfour Beatty is a UL-based multi-national infrastructure company with interests in construction and support services and infrastructure investments. The company released a profit warning and announced the possible sale of its professional services business. The UK construction environment remains challenging, particularly for the most profitable large infrastructure projects. However, a rapid rise in construction margins from current low levels should lead to a significant rise in both earnings expectations and investor interest.Positioning and OutlookDuring the quarter, we continued to look for opportunities to improve the portfolio's growth potential and quality by adding and/or selling stocks based on the team's earnings, quality and valuation or EQV outlook for each company. As a result, we added two new holdings to the portfolio and sold four holdings.Additions to the portfolio were German multi-national sporting goods company Adidas AG (XTER:ADS) and UK-based global real estate services provider Savills PLC (LSE:SVS) (0.74% and 0.50% of total net assets, respectively).Weakening fundamentals led to the sale of Swiss multi-national food and beverage company Nestle SA (XSWX:NESN), German telecommunications company Deutsche Telekom AG (XTER:DTE), Belgium-based automobile distributor and services provider D'leteren SA (XBRU:DIE) and UK-based defense and countermeasures company Chemring Group PLC (LSE:CHG) (all 0.00% of t! otal net ! assets).From a broad market perspective, European valuation levels appear favorable relative to other regions but earnings have yet to see a normal recovery from the recession. Japan's correction so far this year has improved valuations, but critical structural reforms in Japan may prove to be elusive in the near term and quality opportunities remain scarce. Emerging markets began to show signs of stabilization, which has increased focus on the region, but most emerging market economics remain fragile, and economic recovery across the region is expected to be in consistent. In sum, we continue to believe that improvements in broad corporate and economic fundamentals are struggling to keep pace with rising expectations for economic acceleration in the second half of 2014.As always, regardless of the macroeconomic environment, we remain focused on our long-term, bottom-up investment approach to identify attractive companies that satisfy our EQV investment process.Continue reading here.Also check out: Invesco European Growth Fund Undervalued Stocks Invesco European Growth Fund Top Growth Companies Invesco European Growth Fund High Yield stocks, and Stocks that Invesco European Growth Fund keeps buying 
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