Walt Disney Co. (DIS)

(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.

Because it has been hit with ESPN concerns, the stock is kind of bottoming. They’ve already lost something like 10 million subscribers on ESPN. All the rest of the businesses are doing great. Trading down to about 15X next year’s earnings, and 10X EV to EBITDA, which is as cheap as it has been for a few years. Dividend yield of 1.5%. (Analysts’ price target is $124.)

He continues to like this. The ESPN overhang has hurt them, but there are a lot of other spaces, whether it be the theme parks, studio entertainment and the consumer products. Because the media space is a larger portion of their revenue, ESPN is a big thing and cord cutting is hurting them. The next step is to really come out with some sort of Disney flicks to counter Netflix. They have lots of content. Trading right at the 200-day moving average. He is looking to adding to his holdings.

This has been a tough Hold for people. It has gone sideways for about 2.5 years. Their major franchise is their TV network of ABC and ESPN. The fear is that there is going to be severe cord cutting and the “skinny bundle” is going to appear. This has led to the multiple falling because people don’t have as much confidence in the long-term prospects of the earnings growth. Their other franchises are doing extremely well. Currently it is trading at about 15.5-16 times earnings, below the market multiple. He would suggest you move on. There are lots of fish in the sea.

She has owned it for a number of years. There has been cord cutting affecting ESPN. But it is being included in the skinny bundles. They are doing well in terms of the studio. The Marvel theme is doing well. Star Wars is ongoing. It translates into more merchandize and shows in the theme parks. Shanghai Disney is doing better than expected. It should make money this year. (Analysts’ target: $124.00).

(A Top Pick July 6/16. Up 9%.) A very, very well-run company. Firing on all cylinders except for ESPN. Consumer preferences have changed in the kinds of sports that they watch. Cord cutting has been hurting ESPN. As an investor, you have to look past today’s problems, and think in terms of what the potential solutions could be.

This has the best CEO, who is locked up until 2018. The parks business is doing an amazing. Every year they raise ticket prices. They’ve improved margins. Just opened Avatar World. In 2019, they are launching the Star Wars Parks in both California and Florida. They have the best slate of movies, that they can merchandise with toys and video games. ESPN still generates billions in earnings. Thinks the stock is worth $135 today. Dividend yield of 1.4%. (Analysts’ price target is $124.)

He is very constructive on this company. It is one of the top plays on strength in the US and overseas consumer. The one thing you have to watch very carefully is ESPN. They are not getting the same lucrative fees for the cable companies, because people are starting to unbundle their offerings and downloading the sports via the Internet.

This closed at $108.21, and his model price is $127.28, an 18% potential upside. Next year is going to be $125. You will do well with this.

He likes this and feels it is a good Hold. It is going to have a little volatility based on the overhang with ESPN. Live sports moving to the Internet is going to be an overhang for a while. This company holds a lot of amazing content. They have capabilities to produce great shows and movies, and a lot of ancillaries around that in the form of toys, etc. Perhaps this is one you could Trade. If it gets up to the $113 level, you could Sell, and if it gets down to $90 you good buy it.

In the last 2-3 weeks, the stock has pulled back about 10%. Some people are concerned about ESPN, but on the other hand, the company has great product coming out over the next year. It is virtually sitting on the 150-day moving average which is sloping higher, and he would rate this as do or die. If it were to break that level, he would probably go to the sidelines because there may be other things to do in the near term that might be more interesting. Many people use that as a long-term trend indicator. He likes media and leisure within consumer discretionary.

As a franchise, he really likes this stock. They can monetize a theme better than anyone. However, they have 2 major headwinds right now. Ad spending could be a little disappointing, and ESPN is challenged right now and they are going to have to make changes. While this plays out, he thinks you could find safer places.

This has unbelievable franchises from films, which they keep on pulling out every 10 years or so, as well as the theme parks. Those are really 2 unparalleled franchises. This is struggling a little bit with ESPN, which was a massive free cash flow generator. There have been people unplugging cable, so viewership and earnings are down. This is too expensive for him now, but something he would look at when it was cheaper.

(A Top Pick May 18/16. Up 11%.) ESPN has been an overhang on the stock. They’ve been losing customers and this was a very profitable division for them. However, the declines have been moderating, and people are watching content much more differently than previous generations. On their quarterly call, they indicated they are going to offer an ESPN branded direct consumer product later this year.

Just reported earnings which didn’t look too bad. The market didn’t like the earnings, the main concern being their cable business which has ESPN. He likes this franchise in the long run. They have been losing about 1% a year in revenues, but thinks they are going to find a way for that product to continue to make money for them.