Note: AT&T acquired Time Warner for approximately $85 billion in June, 2018.
HBO’s hit series “Game of Thrones” has won numerous Emmys and accolades for its adaptation of R.R. Martin’s medieval epic, and millions of viewers tune in each week as the show serves up palace intrigue, dragons, sorcery, and much more.
You may wonder how that’s possible. It’s because you own something called an Exchange Traded Fund (ETF), which gives you ownership in numerous companies, and a portion of their profits. Even if you aren’t a Stash user yet, this guide will help you understand how investors can own something like Game of Thrones without even knowing it.
1.What’s an ETF?
So what is an Exchange Traded Fund? ETFs are nothing more than a group of investments held within a fund, which essentially is a company that holds investments. The most common group of investments within ETFs are stocks, which are fractions of ownership of a company.
So when you’re invested in an ETF, you’re the owner of small shares of the companies grouped within them. ETFs usually follow a theme, or correspond to a group of stocks with similar traits. These characteristics help users invest in bigger trends, for example in specific industries, economies of particular countries, or even investment themes without the need of buying every single stock related to it.
As an example, let’s take a look at Enjoy Yourself, one of the ETFs offered by Stash, and one of the ETFs that allows you to be an owner of a very small percentage of the profits generated by “Game of Thrones”.
Enjoy Yourself contains some of the biggest companies within the travel and entertainment industries, and its goal is to help people invest in those industries. And when you have money invested in this ETF, that means you own shares of the companies within this fund, including Time Warner, which owns HBO.
Top 10 Holdings of Enjoy Yourself ETF with Ticker PEJ
ETFs help investors diversify risk, which essentially means you’re not putting all of your eggs in one basket by owning just one stock. Like Enjoy Yourself, most ETFs offered by Stash don’t hold more than 10% of a single company in any one fund. In addition to Time Warner, the Enjoy Yourself ETF includes some of the biggest companies in travel, leisure and entertainment including Delta Airlines, American Airlines, and cruise line Royal Caribbean.
2. How Do ETFs Work?
Let’s say you’ve invested $100 in Enjoy Yourself through the Stash App. This simply means that $100 is now invested in the companies whose stock is held by the ETF. The amount invested depends on the weight of the stocks within the ETF. For example, out of that $100 you’ve invested in the ETF, approximately $5.39 is invested in Delta Airlines, $5.28 in American Airlines, and $5.13 in Time Warner. The rest of the money is invested in all the other companies part of this ETF.
In fact, your $5.13 investment in Time Warner would make you the owner of .000000006452% of the company, which has a total market value of $79.51 billion. Something else that’s important to understand: the amount of money allocated to specific companies varies from ETF to ETF, and it’s subject to the company managing the fund, which could change its allocations from time to time.
3. How to own a portion of Time Warner
Time Warner is a media and entertainment conglomerate with three major divisions, including Turner Broadcasting System, Warner Brothers, and Home Box Office (HBO). It has more than $25 billion in annual revenue, and 25,000 employees.
Here’s what $100 invested in the Stash ETFs that own Time Warner stock would look like:
- Enjoy Yourself – $5.13
- Copy the Experts – $1.87
- Blue Chips – $0.41
- Do the Right Thing – $0.39
- Global Citizen – $0.16
*Figures as of August 10, 2017
4. HBO and “Game of Thrones”
By owning one of these ETFs, you are the owner of small fraction of Time Warner and subsequently an owner of the companies owned by the company, including HBO.
HBO’s original programming features acclaimed and award-winning series like Girls, Silicon Valley, Last Week Tonight with John Oliver, Real Time with Bill Maher, and Game of Thrones.
Investors should realize they are not owners of a single show, movie or business segment of Time Warner or HBO, they are owners of a fraction of the company as a whole. This means that investors are rewarded by the profits and affected by the losses generated by all the business segments of the company, and not only of a single business unit of Time Warner.
The table above shows that HBO generated around 25% of the total operating income attributed to Time Warner overall.
What does this mean for my investments?
Most of the ETFs that Stash offers are meant to help users diversify and not hold too much of a single stock.
Because diversification is one of the key components of investing for long term financial goals. So while “Game of Thrones”, or other shows or products owned by companies within an ETF might not have a large impact in your overall portfolio performance, you can still feel a sense of ownership from owning a piece of the pie.
*Source: 2016 Time Warner Shareholder Report.