Walt Disney Co. (DIS)

She is buying this for her new clients. The media sector as a whole has had an overhang, in terms of how people are consuming media and how it is going to be priced going forward. What they have going for them is their content and the type of content. ESPN is a big overhang, because people are streaming and not buying the big cable packages. Sports is a type of medium that people generally want to watch live. They announced they’re going to launch a consumer product for ESPN next year. Eventually they see it as a “pick and pay” where you can choose specific shows. They’ve also announced a consumer product for 2019 for their Disney content. For a long-term investment, this is an attractive entry point.

Disney (DIS-N) or Comcast (CMCSA-Q)? Both fall into the media space, which is particularly challenged right now. The sector is fighting headwinds. He is more positive on Disney, but it has been struggling. With cord cutting, re-bundling, etc. you are fighting the tide, so he would prefer Comcast. However, in the space as a whole, he would prefer not to fight the headwinds.

(A Top Pick July 7/16. Up 3%.) People were concerned about ESPN, so-called cord cutters and carriage contracts. He is still a believer. They have a lot of intellectual properties in their film library. They’ve announced their own streaming service, so are going into competition with Netflix.

There has been a lot of news lately on the cable side of things, which has been an overhang. They recently released some news on their plans to move away from partnering with Netflix in terms of streaming. They have the content and it will be positive. It would take a couple of years to get there. Has an amazing library of content as well as potentially having the cable side of ESPN, which could fold into that. In the meantime, they have great movie franchises.

The CEO spoke at a conference last week, and brought earnings guidance down for the fiscal year 2017, which ends in September. With the hurricanes in Florida, they are going to see less traffic including decreased occupancy in hotels. Have also had to cancel some of their cruise ships. They are going to start streaming direct to consumers’ platforms including ESPN. They envision this to have 10,000 new sporting programs that they are not currently showing. See it as being an a la carte menu where you can just choose to watch one big game or one league, without having to tap them all. The 2^nd platform is their Disney platform which is going to include Disney Pixar, Marvel and Lucas films, which they are going to launch in 2019. All of this looks promising.

This has world-class properties. They have the theme parks, which are unmatched by any other company. They have ESPN, your premier sports channel. There are first-class movie and entertainment productions. Currently it is a little bit on sale because of concerns about how ESPN content is going to get to the consumer and the high prices they can charge for traditional cable distributors is started to weaken a little. Increasingly, people are just wanting to stream their entertainment over their handheld device, and bypass some of the cable companies. Thinks all of this is fully reflected in the price.

There’s been a lot of concerns, particularly over the ESPN franchise, a key part of the business and very profitable. With all the issues over cord cutting, ESPN is not able to hold viewers the way people thought they would. Longer-term, if the stock pulls back enough and gets cheap enough, it will probably be a good opportunity. They have great content and great brand. They have the theme park business and the movie production business, and over time ESPN is going to be a very valuable franchise.

Their parks business may be one of the greatest businesses in the world’s history. They have enormous pricing power, and raise their prices every year. The other part of their business is the movies slate. Not so good in 2017, but 2018 looks amazing for them. ESPN is the drag, and they are losing subscribers. The bad news is already reflected in the stock price and it is trading at a very cheap multiple. Thinks we are going to see double digit earnings growth in 2018. They are buying back stock. No one is giving them any value for the enormous amount of free cash flow they generate. They know what they are doing.

Finds this too hard to analyse. Sold his holdings about 2 years ago. They just opened up a huge question mark by going into the streaming business. Are their products compelling enough that people will enter into a completely new subscription, with perhaps an entirely new app?

The whole space has struggled because of changing consumer preferences. The number of people actually watching TV and networks has been trending down. ESPN was their crown jewel, and is now showing that it is not totally immune to the trends. They are starting to take some pretty aggressive actions to get content to people in different ways. They’ve withdrawn their material from Netflix, and will be starting their own streaming service, which has a huge amount of uncertainty. Trades at a premium to the rest of the group, so she would rather just sit and watch the story play out.

They have a fantastic franchise, but how do you monetize this, especially when how people watch TV, etc. is changing quite dramatically. ESPN was supposed to be the be all and end all, but subscribers have gone down. The company has to sell their products into the right places. Thinks they are doing the right things. They are doing more streaming on the ESPN side and are taking away their deal with Netflix. The brand is so fantastic that if you can buy it at the right price, you will do very well in the long run. 1.46% dividend yield.

A great, long term hold. The value of the franchise is unquestionable. They’ve been under pressure for the last 2-3 years and will probably remain so for the next couple of years as football moves off of ESPN. It has been discounted enough. You are going to make a lot of money in this company.

(A Top Pick July 6/16. Up 11.12%.) A quality name, a quality franchise and well diversified. They create incredibly valuable content that has very, very long shelf life. Their parks, hotels and movie businesses are booming. He believes ESPN will eventually sort itself out. This is still a Buy.

The return on capital has been improving. When you have a pullback it is a good time to get in. He is not worried about cord cutting on ESPN.

(A Top Pick May 5/17. Down 7.08%.) On a 15-year timeframe, it has been a very good total return story. Shanghai is coming on in terms of a theme park. There are some challenges around the ESPN franchise, but ultimately it has big libraries and content that it can distribute. This is a good long-term story.