Disney will add the “magic” to your overseas share portfolio
Walt Disney Co. is a magical stock. The share has been a winner and has significantly outperformed the broader market. Since the start of the reign of CEO Robert Iger, who was appointed in September 2005, the share price has catapulted by 250%. The market has gained only 60% over the same period. The company was Yahoo Finance’s company of the year in 2013 – specifically mentioned were its strong operating results, unsurpassable brands, prudent capital management and excellent stock performance.
At the age of 21, Walt Disney arrived in Los Angeles and started job hunting. Nobody would hire him and he decided to set out on his own. He rented a camera and started making animated cartoons in his uncle’s garage. After this he decided to tackle something that had never been done before – full length animated films like Snow White, Bambi and Pinocchio. Later he ventured into television and after visiting an amusement park that horrified him, he decided Disney could build the best theme parks in the world.
Obviously Walt was a genius. He created the fictional characters of Mickey Mouse, Donald Duck and Goofy. These are icons of animation and have changed the world. In fact to this day the Walt Disney company is, very unfairly, referred to the ‘Mouse’ company.
Walt Disney won 22 Academy Awards and a record four in one year. He received more awards and nominations than anyone in history.
The company boasts Disneyland and Walt Disney resort theme parks in the US as well as international resorts in Tokyo, Paris and Hong Kong. Furthermore next year Shanghai Disneyland, a huge and multiple-year development, will open.
Walt Disney Company also has extensive interests in cable television, publishing, broadcasting and radio and web portals. The company owns ABC Inc. and ESPN Inc. It is the second largest broadcasting and cable company in the world in terms of revenue.
And why has Walt Disney Company been so successful? Great companies preserve their core values and vision but simultaneously adapt and re-invent their strategies and operating practices to cope with an ever changing environment. Disney has always held firmly to a set of core values that includes a passionate belief in creative imagination, fanatical attention to detail and the preservation of the Disney ‘Magic’. The mission that pervades every new Disney project – to bring happiness and smiles to millions, particularly children – has never been abandoned. This drive transcends all races and all boundaries and boarders and has made the company a truly multi-national group. The aim of putting a smile on a child’s face is simple, powerful and clearly carries universal appeal.
Walt Disney Company certainly has had many magic moments. With every new movie hit a whole new industry is born. When “Frozen” was released last year it sparked off a profit bonanza. The characters of each movie live on forever and significant boosts to profits are enjoyed by movie, Broadway, merchandising, the Disney Parks and even the cruising division for many years to come.
Several of the latest movies have netted over 600 million in global box-office receipts. And the Soccer World Cup has been a massive boost to Disney’s ESPN.
Disney has the best entertainment assets and they are going from strength to strength. The shares are one of the top performers in the Dow and are trading at new highs of around $86 per share.
It should come as no surprise that this translates into increasing profits and investors are focused on some very exciting developments. The shares are trading at 20 times earnings and 18 times next year’s earnings. They could hit 100 dollars per share next year as the possibility of 5 dollars per share in earnings becomes a reality.
Is this possible? Well next year a ‘new’ Cinderella will be released in the first quarter. Shanghai Disney opens and Star Wars – greatly anticipated – will hit the box office.
In these days of gloom and doom it is so comforting to associate oneself with a company that has fundamentally good principles at its core. And it is comforting to see that the company has been rewarded with many accolades and an ever increasing share price.
An investment in these shares will be followed by many contented smiles in the years to come.