Ladies and gentleman, this fund investor grew tired of watching his family's portfolio get pummeled by double-digit percentage points and decided to become a stockholder. So, I snapped up a tiny position in Walt Disney Co. (NYSE: DIS).Before now, I avoided individual equities for several reasons, including that I was prohibited from owning them because of my previous job. I also felt uncomfortable owning stocks since I write about so many of them. My financial planner also discouraged us from taking positions in individual stocks, saying funds are a better way to go.
But after taking a quick look at my last brokerage statement, which showed my portfolio is down about 10 percent, I soon got over my unease. I realize that it's foolish to chase short-term gains but I thought something had to be done. One of the funds we owned seemed to be heavily weighted with gambling and leisure stocks, a sector that I don't expect to come back for a while. We got rid of it and added an ETF that covers the tech sector, which should be among the first to rebound once the economy starts to improve. Still, I wondered if I could do better.
Disney caught my eye a year ago when I labeled it a "slacker stock" because it was such an underachiever. The shares have barely budged this year, moving down about 3%, which in the current market is not bad. Moreover, Disney is outperforming peers such as Viacom Inc. (NYSE: VIA) and Time Warner Inc. (NYSE: TWX), both of which are down double digits. The stock is trading at forward multiple of 13, which appears cheap to me considering it's lower than Time Warner and unlike Viacom pays a dividend.
Revenue growth was a moribund 2% (pdf) in the latest quarter mainly due to poor results from the Studio Entertainment business. That's bound to happen given the boom and bust nature of movies and the disappointing performance of "The Chronicles of Narnia: Prince Caspian." Several other films such as "Wall-E" and "Beverly Hills Chihuahua" look to take up the slack.
Theme parks have held up well during the economic downturn as European, Canadian and Asian tourists flock to Walt Disney World because of the still depressed dollar. During the last quarter, Parks and Resorts revenue increased 5% to $3.0 billion and segment operating income increased 3% to $641 million. The business should also post strong results during the current quarter because of the summer tourist season.
Let's not forget the company's stable of characters ranging from Mickey Mouse to Hannah Montana. The Jonas Brothers tween band may become the company's next $1 billion franchise.
But what really sold me on Disney was the 2006 baby boom when the largest number of children were born in 45 years. Those kids, including my son, are just getting into Disney merchandise and characters. That's why I decided to take the plunge.
Disclosure: Jonathan Berr is a Disney shareholder who has no plans to see Prince Caspian.
Why do we have a weak dollar?
Holiday hiring slow for retailers
Closing Bell: What sell-off? (AIG, ABK, EPR, MBI, JAVA, ORCL, ERTS)
Reader Comments (Page 1 of 1)
9-02-2008 @ 4:31PM
Paul Martin said...
Take some time to see Prince Caspian. If you see that the Box Office is disappointing, give it a chance, and help boost the revenue, even if just a little bit.
9-02-2008 @ 4:30PM
roudy11z said...
I bought Disney over a year ago but after reading this comment from JB I am going to buy some more.
RoudMan
9-02-2008 @ 6:04PM
Terry said...
I have watched Disney stock for several years. For all the potential the company posseses, the share price stays within a very close range. If I bought the stock today, I wouldn't worry about it decreasing much due to current conditions, but I also would not expect it to increase much either given its past performance
9-03-2008 @ 10:25AM
Danirad said...
One thing I have learned through rough experience is to never have anything to do with a company whose logo is of a rodent, or a shark. However I must admit that _product_ involving the same, especially kids' movies, seems to be diametrically counter to this observation :) .
9-04-2008 @ 8:30PM
Roy said...
Disney's CEO Iger & the other excecutives have been dumping their disney stock. search google and you the stories including one titled..."Iger to shareholders, you buy and I sell"
9-04-2008 @ 8:29PM
Royce Mathew said...
I sued the Walt Disney Company along with Ted Elliott, Terry Rossio and Jerry Bruckheimer Films/Inc., in Federal Court in regards to Pirates of the Caribbean movie franchise. See photo proof of my lawsuit and of fraud and corruption at disneylawsuit.com - I welcome all communications.