If you haven’t enjoyed the stock market’s plot line in recent years but you’re still able to stand the suspense—then you might want to go to the movies.

While industry estimates reveal that 60 percent or more of movies produced each year are box- office flops, those that do resonate with viewers can generate a pretty penny for investors.

Consider the 2009 hit comedy “The Hangover,”which cost $35 million to make, and earned a cool $242 million after production costs.

Other, low profile films that generated a hefty return on investment, ROI, according to Baseline Intelligence, a Los Angeles market research firm which tracks the industry:

• “The Blind Side,” which cost $35 million and earned $221 million at the US box office.
• “The Blair Witch Project,” which cost just $300,000 to make, and earned an eye-popping $141 million domestically.

And then, of course, there’s the holy grail of low-budget independent films, “My Big Fat Greek Wedding,” which was produced for $5 million and had gross worldwide revenue of $369 million. (Slideshow: Most Profitable Films.)

“Any failures are magnified, but investors really get to see the upside potential of movies compared to say, real estate,” says James Jaeger, an independent film director and owner of Matrixx Productions.

Even those that flop in the theater, he notes, still have the potential to break even or produce a profit in the overseas markets, through video-on-demand contracts, DVD rentals and product- licensing deals.

And don’t forget, they’re a non-correlated asset, meaning the success or failure of cinema is not influenced by the ebb and flow of Wall Street, a prized characteristic of alternative investments since they theoretically helps to balance one’s portfolio.

Risky Business

But make no mistake, investing in films is risky business, says Andrew Rudd, chairman and chief executive of Advisor Software, a financial advisory firm in Lafayette, Calif.

For every success story you hear, he said, dozens more die on the vine in pre-production, never debut in the theater or go so far over budget that any profit margin is lost.

“It’s very risky,” says Rudd. “Everyone naturally thinks of “Avatar” and “My Big Fat Greek Wedding”, but for all of those that you know about there are literally hundreds of thousands that die.”

Rudd developed a valuation software model to help ferret out potential winners in the film industry for private equity investors.

Because independents so often fail, he says, he focuses exclusively on those produced by the major Hollywood studios.

His analysis includes such factors as genre, the caliber of the director, budget, whether the lead actor is a male or female, and the type of contract actors are granted—factors that influence a film’s profitability. (Big name actors help draw an audience, but they also might demand that they get paid first out of the box office receipts, which limits the ROI opportunity for investors.)

The major studios and their parent companies—20th Century Fox/News Corp.Sony Pictures/Sony , Warner Brothers and Paramount Pictures/Viacom —have historically financed their own films through revenue generated by previous films and licensing deals, but are now raising funds other ways as well.

“Over the last five years or longer, though, times have been hard so they’re now much more willing to try and bring in partners,” he says, noting large movie house productions cost an average of $100 million.

If you’re still looking to invest in Hollywood, the best approach is to spread your bets across a variety of films, says Hal Vogel, an economist who teaches a course on “media investing and economics” at Columbia University and founder of Vogel Capital Management.

“You should never invest in just one film, but rather a portfolio of films,” says Vogel, who is set to release the 8th edition of his Entertainment Industry Economics textbook this fall. “Odds are that you’re going to fail on some of them.”

In The Business

Private investment pools and hedge funds that finance a basket of films and entertainment projects do exist, including Noci Pictures Entertainment in Los Angeles.

Another fund, Panda Screen Productions, was launched last year by fund of hedge funds specialist Infiniti Capital. It will work with Green Leaf Film Studios in China and Oscar-winner Richard Taylor to attract up to $400 million and “invest in a diversified portfolio of film, television and special projects with merchandising potential.”

Such funds do not disclose performance data, but Noci Pictures Entertainment declares on its Web site that it “can in certain instances provide a 60-percent to 100-percent return on investment, prior to revenues.”