Walt Disney Co. (DIS)

There is an issue with how the purchase of Fox is going to be worked out. Became very convoluted. Still owns all these great franchises. It is a great company but a little complicated right now.

He bought it four months ago when they bought 21st Century Fox, because it altered Disney's entire future. Disney was stuck in the cable "old world" and was having trouble building ad revenue. But now with Fox--which owns 30% of Hulu and Disney owns another 30%--Disney has a great, new opportunity, namely to go head to head with Netflix.

He does not hold it, but is looking at it given the recent weakness. Trading near 13.5 times earnings, which is cheap. There is erosion on the networks and plenty of competition, but they are getting into streaming video. You could buy it safely here. Yield 1.7%. (Analysts’ price target is $121 )

Strong media, studio and theatre businesses, not to mention expansion to China with a theme park. But the challenge is cord-cutting in cable. They are strategizing though, like competing with Netflix next year. It will need a lot of capital and some time to transition though.

Used to own it. Trading at just under 11 times Enterprise value over EBITDA which is more or less the 10-years average. He feels neutral on this stock. Long term is probably going to be OK. The fact that is trading below the 200-day moving average stops them from buying it.

He owns a large position in Comcast, which is causing him grief. Comcast and Disney are aggressively bidding on Sky News, because Sky is the UK leader in subscriptions, and Comcast and Disney ultimately want compete with Netflix. He's taken a step back from Disney and Comcast. He'd rather just own Netflix.

(A Top Pick May 5/17, Down 9%) Over 15 years it's been fabulous and wishes he had bought it sooner. Their acquisition of 21st Century Fox will be a great play. Valuation is not expensive at 14x forward earnings. Has a long history of dividend hikes. Buy this on sale and put it away for a long thaul.

Nobody monetizes content better: filmlibrary, theme parks, Star Wars. Has been going sideways, but enjoyed a big beat recently. Media overall isn't a neighbourhood he loves. They have a major overhang: ESPN and cord-cutting.
You're taking a bit of a gamble here, though he loves the company. They're in transition. Wait.

He once sold it, because he saw Disney trapped in cord cutting so their cable subscribers were dropping. But after the 20th Century Fox purchase, he changed his mind. Disney's new streaming service through Hulu will compete with Netflix. An exciting opportunity here.

It is pulling its videos from Netflix. Since then it has pulled down. It is strong from October to the beginning of February. This is not its strongest period anyway. It is weak at this point.

Fox acquisition positive. But their streaming services is a ways away. Dead money for a year. Small dividend pays you to wait. Fantastic content. Overhang is ESPN, but their pro sports streaming side may be positive. Don't expect huge returns from Disney for in the near future.

The company will grow with its launch of ESPN to the consumer and then Disney to the consumer. At the end of 2018, they will not stream through Netflix and will instead stream their content directly to the consumer. If the acquisition of FOX goes through, this will also increase the content they have available to stream. Their parks are doing well, Shanghai is doing very well. Traffic is good and their are raising prices. Their movie studio is also doing well, which drives the success of their retail products. The stock valuation is trading only at 13 or 14x forward earnings, and the tax package will increase their free cash, which they can use to improve their parks.

(A Top Pick Feb. 16/17, Down 4%) Loves it. Just raised admission prices at their theme parks. Terrific what they're doing with their content library by competing with Netflix with their own streaming channel. Cruise line doing well. ESPN is a big question mark though. Trading at 15 times earnings.

He owned this in the past and sold at 3 or 4 years ago, because a great percentage of revenues and profits were made up of ESPN and ABC, and he was seeing cord cutting and subscriber growth waning. The purchase of 21st-century Fox will take those shackles off. They are getting a great library, but also control of HULU, a streaming medium. They own 30% already, but 21st-century Fox also owns 30%, so they now have majority ownership. A year from now we are going to see that "glass half empty" of cord cutting into a "glass half full". They are going to take Netflix on and you are going to see a Disney channel being streamed into homes. Trading at a reasonable multiple. Dividend yield of 1.5%. (Analysts' price target is $119.18.)

There are a few headwinds. People are concerned about ESPN, cord cutting, and will they be able to monetize ESPN the same way as they have in the past. There is also the threat of "over the top" with the likes of Netflix. They have really valuable content in a number of different areas, and are going to be able to figure out a way to monetize that. They’re starting their own "over the top" service. Netflix clearly has a big advantage on people downloading movies and watching them on their platform, but Disney and other companies have a lot of valuable content, and will be creating their own services, creating some real competition. He likes this, and would think of it as a long-term business with really valuable content that you would want to own for a long period of time.