Wall Street Journal | Blockbuster Movies Fuel Big Wins for Hedge-Fund Investors

When it came to Lions Gate Entertainment Corp. LGF +1.54% and MGM Holdings Inc., Carl Icahn yelled “cut” too early.

Box-office hits including “The Hunger Games,” “The Hobbit” and “22 Jump Street” have revived the once-struggling movie studios, rewarding a handful of hedge funds with billions in paper profits.

But Mr. Icahn sold shares of the companies before the rallies, missing a chance to score about $2 billion in gains. One of the funds even bought its stake directly from the activist investor.

Shares in Lions Gate and MGM Holdings have more than tripled since 2012, thanks to a series of blockbuster films, even as competitors have focused more on stable, faster-growing television businesses.

The hits have delivered big gains and newfound Hollywood clout to a handful of funds, including Anchorage Capital Group LLC, Highland Capital Management LP, and MHR Fund Management LLC.

Highland co-founder James Dondero said the firm remains supportive of MGM’s management. Steven Azarbad, chief investment officer of Maglan Capital, called MGM “the single biggest contributor to our performance.

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