Walt Disney Co. (DIS)

In the past couple of years there has been an overhang with ESPN about cord cutting. In December, they announced the acquisition of Fox, and the stock has responded favourably. As a "standalone", Disney is a great content company, and with the addition of Fox, it is going to be an even greater content company, because they are going to get some other platforms. They've announced they are launching their own "direct to consumer" ESPN channel this spring with one from Disney next year. Dividend yield of 1.5%. (Analysts' price target is $113.50.)

The big news around Disney today is their acquisition of Fox. It’s a huge deal. As the integration unfolds into 2018, you may get a better opportunity to buy in. This whole space and the way people consume media is changing. Disney certainly owns a lot of content that people know and love and watch on a regular basis but the monetization of that will change, and understanding where their potential pinch points are could evolve also.

Buy at these levels? He thinks it’s a buy. A classic juggernaut. Thinks the acquisitions of the FOX assets is going to go through. He’s seen good enough operations in the last 5 or 6 years and so consistent. The results are really good; 12-13% return year in year out. It is stretched on valuation, but he will pay for a good company over a lousy or one that looks super cheap. He is not too concerned about the ESPN situation with people cutting their cable subscription and going to Netflix. He thinks they will figure out a solution either stream it or whatever, the content is still there, it’s just a different platform, they will figure a way to monetize it.

Looking at a multiyear cycle, this has had a very good total return with dividend increases, etc. It struggled in the last couple of years because of issues around ESPN and people streaming content in different ways. They’ve started a Netflix type offering, looking to buy 20th Century Fox assets, and have a whole bunch of movies set to come on. They have a library which they can monetize and it is going to get larger. Dividend yield of 1.5%. (Analysts' price target is $112.)

Had been reluctant on this, because of their model getting lapped by new technology. Their model was distribution of media products through conventional resources, mostly in cable. Most of their profit contribution came from ESPN and ABC. The acquisition of Fox kind of gets them out of the penalty box with a much larger content in order to take Netflix on. They are going to have a streaming sports package, a streaming package for family-friendly media as well as more traditional adult oriented opportunity. He is quite positive on this.

Watching this with interest. Sold his holdings not too long ago, as it seemed to be drifting down. The Fox acquisition may change the equation. It did very well for him until it started going sideways in the last year or so. The jury is out and we are going to have to wait and see. Thinks they are going to be head to head with Netflix as soon as the dust settles.

Recently sold his holdings. Trading at about 11X EV over EBITDA, slightly above historical averages. It pushed above the 200-day moving average, and is now slightly below that. Has a possible content deal with Fox which would help. That would move towards the idea of Disney streaming their own content with Fox content, to go up against companies like Netflix. Media is supposed to benefit from tax reform, which is why the company probably spiked up a bit. He likes this longer-term, but is waiting for a possible entry point to look at it again. 1.6% dividend yield.

Based on analysts’ consensus earnings numbers, his calculated FMV is about $115. Also, it is trading right up against one of his critical technical resistance points. It has been moving around that point for the last couple of years, and hasn’t been getting anywhere because earnings are not going anywhere either. This is a company that doesn’t get above its FMV. He doesn’t see where this stock is going to go.

(A Top Pick May 5/17. Down 8%.) In the process of trying to acquire the 21^st-Century Fox assets. Also looking to deliver their own Netflix stream. This is the time you want to take advantage to buy a high quality franchise like this.

Parks and movies is where the bulk of the revenue is from. When you hear news of ESPN hurting them, that is the time to buy them. The Frozen franchise is the cash cow that never seems to end.

Doesn’t think this is a good time to be getting into this. Sold his holdings 2 or 3 years ago because everybody thought the Marvel movies were an absolute layup, but as it turns out nothing is assured in this business. Also thinks people are dropping ESPN. There has also been a tremendous growth of online.

Peaked at $116 in March or April. The worries had been on ESPN, cord cutting, etc. That has mostly happened, and they are acting to take measures to stop the bleeding and do different vehicles of distributing. ESPN was 110 million subscribers a year ago, and now it is like 89 million. “Live sports” is one of the last bastions of things that will stay. There is another Star Wars movie coming, and usually the stock does well. Also they get the attendant merchandise sales and all that. All it really has to do is go back to where it was, and you would have a 16% return. The entry point is attractive. Dividend yield of 1.6%. (Analysts’ price target is $113.50.)

Had to kind of talk down earnings due to hurricanes, and close up their theme parks for a couple of days. This year has been tough because there hasn’t been a good movie slate. Q4 numbers are going to come out soon, and there were no new releases in Q4. These issues are well known. ESPN is now about 20% of their operations. The company has one of the best assets in the world in their theme park operations, which probably represents about 40% of their business. They have pricing power and attendance is growing and there is launching of more and more additions to the theme parks.

This is a really great company. There are lots of companies with stretched valuations, and this is one of them. It looks too rich, as well as having a bit of problem with ESPN. His charts show him an improving ROC, which has been improving for about 8 years. Unfortunately, the stock has also improved for about 8 years. What if returns start to slide a little.

Besides movies, this has theme parks, cable networks, consumer products, etc. Has owned this, made some money, but decided to cut loose at this time. Trading at about 10.3X Enterprise Value over EBITDA, which is in line with historical metrics over the last 10 years. 1.6% dividend yield, which they are going to grow modestly over the next few years. They’ve cautioned about 2017 weakness, due to higher costs associated with sports and tough film comps. That is going to ease in 2018. Also, Star Wars is coming out in December. Some of the near-term positives are a strong movie slate, theme parks, including Shanghai. However, the ESPN cord shaving is in mind, which will continue to push the stock down. $90 could represent a better re-entry point.