Diseny, What do They Do? A Compelling Reason to Invest

Disney, What do They Do? A Compelling Reason to Invest

     The Walt Disney Company (DIS) is an international family oriented multi-media company. The company operates in 5 different segments: Media & Networks, Parks & Resorts, Studio Entertainment, Disney Consumer Products, and Disney Interactive. October 16th, 1923 is considered to be the formation of the Walt Disney Company when the company signed a contract to produce their first animated cartoons. The company has grown into something Walt Disney probably had never imagined. It is now valued at $168 billion and has a share price that currently fluctuates around $100. 

     Their media department consists of Disney Channels, ABC/ABC Family Channels, ESPN, all of their associated studios and several Television Stations. These assets have produced the #1 morning show "Good Morning America", Emmy Award winner "Modern Family", "Dancing with The Stars", Emmy Award Winner "Lost", "General Hospital", "20/20", "Scandal", and "Sports Center". I would be willing to bet that you, your dad, or your mom has religiously watched one of the shows I mentioned (my mom LOVES GH, shout out to Judy!). The main earner, ESPN, creates revenue in excess of $10 billion as of 2014, which is half the GDP of Honduras. Media Networks ended 2014 with $21,152 billion in revenues (up 4% from 2013).
     The Parks & Resorts department consists of two U.S. amusement parks Disneyland & Walt Disney World (about the size of San Francisco), 4 international parks Shanghai, Tokyo, Paris, and Hong Kong, a Cruise Line, Vacation Club, and many Resorts. Their flagships Disneyland & Walt Disney World made the majority of this segments revenue at $12,329 billion (81.6%). Their

international sub segment is almost complete with it's largest project since Paris, Disney Shanghai. It is a joint venture with the Shanghai Shendi Group (majority owner at 57%) and will hopefully begin providing a revenue boost to this segment when it opens in the Spring of 2016. While both Domestic and International sub segments grew in 2014, Paris dragged down growth with a decrease of hotel bookings and park attendance. As the second highest revenue stream for The Walt Disney Company, Parks & Resorts grew their revenue by 7% and operating income 20% from 2013-14.
     Possibly the most famous segment is the Studio Entertainment portion headlined by Pixar (has won 30 Academy Awards), Marvel, Touchstone, and Walt Disney Studios Motion Pictures. They have produced movies such as Academy Award winning Frozen, Oscar Winning Big Hero 6, Pirates of the Caribbean, Toy Story, Iron Man, Captain America, Avengers, Pretty Woman, Good Morning Vietnam, Dead Poets Society, Armageddon, and Pearl Harbor. The list from just Touchstone Pictures is over 200 films. Possibly the highest performing sector, revenues grew by 22%. Net income grew by 134% attributable to keeping operating costs down and large increases in home entertainment and theatrical distribution.  With the acquisition of Lucasfilm and Marvel having a vault of over 7,000 comic characters I can't see this segment flat lining as long as they keep their creativity.

     The Disney Consumer Products segment consists of Licensing, Publishing, and Stores (online/physical over 200). This segment takes all the popular characters and monetizes them through selling books, magazines, toys, and other consumer products or the rights to create those goods. While not explicitly stated I believe this segment will rise and fall with the popularity of their Studio releases and as stated in the 10-k 2014's segment revenues were helped by the popularity of "Frozen" one of their hit studio releases. If their creativity continues as it has in the past this segment will keep up it's double digit growth, 12% revenue and 22% operating growth from 2013-14'.
     The last segment, Interactive, is relatively new as it was founded in 2008. It encompasses their famous video game Infinity, mobile game Where's My Water?, virtual online world Club Penguin,

and babble, a parenting blog site. Largely due to success with their Infinity game this segment turned a profit in 2014 making a meager $116 million. Inserting new characters into the Infinity game will be key in keeping that revenue source going in the future, and they have already done so with Star Wars characters.
     Disney's future will be determined by it's ability to monetize the outcomes of it's creativity. They have shown in the past they are extremely capable of this by creating characters that captivate and entertain their audience but can also be turned into a source of revenue for all business segments within Disney. Detriments to it's future might be the beginning shift away from cable and satellite TV packages that include their most profitable product, ESPN. But the acquisition of Marvel Comics and Lucasfilm will more than make up for any revenue decreases in that segment. There is no doubt why Disney is in the Dow Jones Industrial Average and their should be no reason why it isn't in your portfolio. A company that was founded on creativity and breeds it in all aspects of it's business I believe will have no problem continuing this. But don't take my word for it...do your own research.
     

The Great White Buffalo

The Great White Buffalo

     As elusive as they may seem they do exist, they really do. In true popular culture definition A Great White Buffalo is "the" perfect mate, that is usually unattainable. On Wall Street I would be willing to bet this would be equated to Berkshire Hathaway (NYSE: BRK.A) a company that has risen it's share price by over 10,000%! But what if I told you that The Great White Buffalo could be yours? Would you believe me? Well you should because it's true. They are called "Blue Chip" stocks, they are not as unattainable as they may seem and you probably already know most of them.
     The Dow Jones Industrial Average (DJIA), or The Dow for short tracks some of the best Blue Chip stocks. It is a composite of the top 30 public companies: American Express (AXP), Apple (AAPL), The Home Depot (HD), McDonald's (MCD), Walmart (WMT), and Disney (DIS) to name a few (you can find the full list here). Since 12/SEP/15 when The Dow was at 809.23 it has grown 1,889 % to 16102.38 almost 40 years later.

DJIA 75' to 2015' Taken from Google Finance

The Dow is where these Buffalo's live and should be hunted. While firing money at The Dow Rambo style would probably yield acceptable results it isn't very efficient. So let's practice some trigger control and take the best shots possible like Chris Kyle.
     Hunting these companies is pretty simple, most of the work is already done by the formation of the list. You will simply have to buy them at the best price which can be as complicated or simplistic as you make it. You could simply attempt to buy it at the lowest Price to Earnings ratio as possible or you can add in as many valuation criteria as you want. And to get even more complicated you could do your own industry research, sift through all the companies annual reports, and attempt to understand it's business model more than it's CEO does.

Get it?!? No tear formula!!!

     To get the idea look at Johnson and Johnson (JNJ), John and Johnson is a holding company, they own many different companies but all deal in Health Products. Their famous brands are Neutrogena, Listerine, Band-Aid, Visine, Acuvue, to name a few, and if you have ever had any kind of surgery
you have probably been operated on with Johnson and Johnson products. The industry they operate in is something that isn't affected by slowing consumer purchasing. In a bad economy people are still going to buy shampoo, medicine, and have surgeries. They boast an impeccable dividend record, having never decreased or stopped it since it's inception in 1987 with a current yield of 3.28%. They are fairly valued with a price to earnings ratio of 16 and boast the highest profit margin of any health product conglomerate I could find (25.39% for Q2 15'). Bottom line is it backs up it's position in the DJIA with great stats.
     Your search for The Great White Buffalo is much closer to an end than you think.  Sometimes the best companies to invest in are right in front of your eyes and with a company like Johnson and Johnson in your portfolio you are probably on your way to a no tear formula for investing. But don't take my word for it, do your own research.