Is The Walt Disney Company (DIS) The Perfect Stock?

Page 1 of 2

The run-up in the stock market has eliminated nearly all great bargains, but many stocks remain sanely-priced and could easily reach insane prices, should the bull market continue. The Walt Disney Company (NYSE:DIS) is one such company. Although it has run up to over $65 per share after starting the year at $50, the stock still trades at a decent price for investors looking to get fully invested in this bull market.

Wide moat

The Walt Disney CompanyThe Walt Disney Company (NYSE:DIS)’s share of children’s attention is unprecedented; nearly all American children grow up watching Disney productions and demanding their parents buy related merchandise. The company’s strong reputation and unbeatable brand give it a wide moat.

In addition, The Walt Disney Company (NYSE:DIS)’s portfolio of television networks and movie library create a large and stable stream of cash flows that can be used to build out the brand even further. For instance, the company recently acquired the Star Wars franchise and continues to pour money back into Pixar, which turns out hit after hit.

The Walt Disney Company (NYSE:DIS)’s deep library of hit movie franchises affords it a degree of protection against making a flop. For instance, losses from the colossal failure of John Carter to meet the company’s box office targets was offset by the numerous revenue streams still emanating from past hits like Pirates of the Caribbean and Toy Story. This enables the company’s creative team to take big risks that smaller rivals cannot afford in the quest to develop the next blockbuster.

Competitors cannot halt Disney‘s progress

The Walt Disney Company (NYSE:DIS)’s television networks all have wide moats. ESPN and the Disney Channel dominate their respective target markets. However, competition is still fierce.

For instance, Scripps Networks Interactive, Inc. (NYSE:SNI) occupies a variety of niches through channels like HGTV and Travel Channel. These niches draw a more targeted audience, which Scripps uses to charge advertisers higher rates than Disney can charge on its properties. Scripps Networks Interactive, Inc. (NYSE:SNI) takes advantage of this pricing power and earns higher margins on its cable properties than Disney does. Scripps, however, has had capital allocation problems, including a misguided attempt to expand internationally. As a result, investors should stay away until management can find better uses for its free cash flow.

Disney’s creative competition comes in the form of Dreamworks Animation Skg Inc (NASDAQ:DWA). Led by visionary producer Jeffrey Katzenberg, Dreamworks Animation Skg Inc (NASDAQ:DWA) is a factory for blockbuster animated films. The depth of its library of hits rivals that of Disney, which is why the latter company has tried for years to acquire Dreamworks.

Fortunately, however worthy a competitor Dreamworks may be, both companies may prosper at the same time. Most viewers do not first decide to see a movie and then choose which movie to see; most viewers see a trailer for a movie that makes them want to go that specific movie. As a result, viewers are likely to buy a ticket for both a Disney movie and Dreamworks movie if both turn out well. Therefore, Dreamworks and Disney compete for awards, but not for viewers.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!