Investment Thesis: Disney

I recently purchased Disney on August 2, 2016, at entry price of $94.81.

Not too many people are saying you should buy DIS these days.  There are a lot of trends that seem to be threatening the business:  the rise of cord cutting, the unbundling of sports and cable channels, the increasing customization and personalization of content.

And, from a trend perspective, things are looking rough.  The stock is down 9% for the year and is the worst performing stock in the SP500 during that time.


Not a good year for Disney’s stock.

But – if we look at a longer time period, things look a little more positive.


But, over the past 5 years, Disney has performed really well against the SP500.

Here’s the thing: Disney has been one of the top performers within the Fortune 500 for total return to shareholders over the past 5 years.  It’s possible that their business environment has changed enough to make them lose their competitive advantage…   but I think that’s unlikely.

My thesis is this:

  • The channel disruption within media and entertainment is a big deal.  Whoever owns the distribution can control access to customers on some level.  But Disney’s competitive advantage was never about controlling the channel.  Their advantage has always been about monetizing content across an array of experiences better than anyone–and they are still doing it well.
  • Unbundling of sports broadcasting can certainly cause problems for ESPN, one of Disney’s biggest revenue sources.  But sports are not going away:  if anything, they’re increasing in popularity and value, the current football season ratings slump aside.
  • Content is increasingly personalized, which means there’s more value in the tail of the content.  But that doesn’t mean that mass market movies and experiences will disappear: it means that only the leaders will win.
  • Finally, the rest of Disney’s income sources are doing well.  Their park in China is exceeding expectations, and their box office offerings are strong.

And, big picture, media and entertainment are a growing part of all our lives. I think Disney will thrive over the next five years, and the current price makes it a good investment.

Stay tuned to see!




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