DISNEY (DIS) INVESTMENT THESIS

The wonderful world of Disney transcends Magic, inspiring the imagination of children and bringing families together. From the early days of Mickey Mouse the company has grown into a global media and entertainment conglomerate.

INVESTMENT THESIS

An Investment Thesis has to be looked at within the context of three areas
1. Best in class
2. Secular growth trend
3. Macroeconomic environment

The Investment Thesis is founded on three pillars

1. THEME PARKS AND CRUISE
Disney is the best theme park operator, not only domestically but internationally as well, with franchises across the US, Europe and Japan.

More important than the theme parks is the effect of exponential growth in a self sustaining business. Each family that attends a Disney park or cruise consists of two or three children. As those families experience the bond Disney creates and share the memories, they will grow up into parents and want their children to share those same experiences.

A strong economic environment with record employment levels and rising wages increase the disposable incomes of families.

2. MEDIA AND ENTERTAINMENT
Disney creates blockbuster movies generating billions in revenue with franchises including Star Wars, Marvel, Pixar Animation. ESPN is the largest sports network.

Disney recently acquired assets from the Fox network to expand it’s footprint.

3. ONLINE STREAMING
The subscription based business model makes online streaming services an exceptional growth opportunity within a strong secular trend. Disney is expected to introduce Disney+ in 2019. An annual production budget exceeding $12B, strong franchises and a vast library provide a solid foundation to attract tens of millions of subscribers.

There are threats and weakness.

An economic downturn will affect families disposable income and impact theme park attendance. Since 2010, theme park prices have risen from $80 to above $125. Average ticket prices would likely have to decrease, or discount/incentive strategies used, to stimulate attendance.

Regulatory requirements involved in the fox acquisition could limit planned opportunities.

Disney is a conglomerate whose size makes it slow to respond or adapt to changes and secular trends can change or evolve rapidly. Netflix created the Online Streaming trend and has first mover advantage with a six year lead and an installed base of over 125m subscribers.

What does that mean at MONEYWISEHQ?

Disney is a place that creates magic and it’s that certain magic that is going to be around for years, creating the exponential growth which provides the foundation for a strong long term investment holding.

Disney is best used as part of a long term investing strategy, it’s not necessarily a trading stock, but there are opportunities to add to positions at the right price. It’s important to follow the earnings reports to validate the Investment Thesis, not only for Disney’s benefit, but also the impact of progress on competitors such as Netflix.

Disney is a stock which could be considered as an education saving plan investment to help pay for your children’s future. Disney is a fun company and it’s a great way to get kids interested and involved in investing. Imagine taking them to Disneyland and explaining that they own a piece of the Theme Park and Mickey Mouse is going to help pay for them to go to University when they grow up.