There truly are very few places to hide during the current financial crisis and economic recession. Trust in the markets is at an all-time low, and volatility is at an all-time high. The most senior of professionals in this business are shaking their heads in amazement.
We have not seen anything like this during our lifetimes. When it will end is anyone's guess. The silver lining, I suppose, is that it will indeed end at some point. When it does, investors can look forward to a landscape of well-run companies trading at discounted prices.
One of my favorite blue-chip names that have been taken down along with everyone else is Walt Disney Co. (NYSE: DIS).
I wrote about the company in early September when times were tough, but before the financial crisis brought its wrath. At the time, I thought shares were undervalued at a price just north of $30 per share.
Today, in the midst of a bear market, shares trade for $22. Understandably, investors are concerned about an economic recession that is long and deep. For an entertainment company dependent on a strong economy, Disney faces the very real risks of smaller revenue and profit numbers in the near term.
My point is that the pain today will eventually subside. Growth will return and so, too, will profit growth. Disney properties are still top notch, and it is a leader in its category. No one can compare.
At current prices, shares of Disney trade for less than 10 times trailing and forward earnings. Even though profits are expected to be flat next year, the company is still profitable. I would say that is impressive given the operating environment.
Analysts expect the company to make $2.12 per share in the current fiscal year ending in September, and $2.34 per share in the following year. If the company earns $3 per share down the road with a 15 multiple, Disney shares would price out at $45 per share.
It is not unreasonable to think that DIS can earn that amount in the next three to four years. I like to own stocks that have the potential to double, and with very conservative assumption, Disney fits that profile.
In addition, while you wait for higher earnings at a greater multiple, Disney pays a dividend of 1.5%. Even if the recession is longer and deeper than expected, I think Disney is positioned to rebound nicely.
We have learned that the world is much smaller than most believed during the past few months. Everything is interconnected. Disney now finds itself operating in that smaller world. Given its properties, I think it will do just fine.
Jamie Dlugosch is a contributor to InvestorPlace.com.
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