Harding Loevner on Walt Disney (DIS): “There’s Fight Left in this Old Dog”

Harding Loevner, an investment management firm, published its “Global Equity” fourth quarter 2020 investor letter – a copy of which can be downloaded here. A net return of 13.73% was recorded by the fund in the fourth quarter of 2020, trailing both its MSCI All Country World benchmark that delivered a 14.79% return and its MSCI World Index that had a gain of 14.07% in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Harding Loevner, in their Q4 2020 investor letter, mentioned Walt Disney (NYSE: DIS) and shared their insights on the company. Walt Disney is a Burbank, California-based diversified multinational mass media and entertainment conglomerate that currently has a $338.6 billion market capitalization. Since the beginning of the year, DIS delivered a 2.77% return, impressively extending its 12-month gains to 96.17%. As of March 30, 2021, the stock closed at $185.53 per share.

Here is what Harding Loevner has to say about Walt Disney in their Q4 2020 investor letter:

“One of the original constituents of the Nifty Fifty holds a place in our portfolio today. When we bought Disney three years ago, we wrote that “we view Disney theme parks in the US, Europe, and China as resistant to online substitution.” We did not reckon on a pandemic, which closed all of them, and sent all of usto our couches. Disney, however, wasready for us, brilliantly illustrating the importance of management foresight and change management. Or, as Louis Pasteur said, “chance favors the prepared mind.”

A century after its founding in 1923, Disney is in the middle of a bold shift from its legacy media networks & entertainment model—with cable TV, theme parks, and theater films dominating its earnings—to a direct-to-consumer streaming media model. The keys to Disney’s transition: matchless storytelling, coupled with financial strength. The company reliably creates content that people all over the world are eager to consume. It also hastened spending on original content to attract subscribers to its new streaming platform. These factors have allowed Disney to weather the pandemic having expanded its direct engagement with customers. Such connections yield a rich harvest of insights used to customize offerings on a mass scale, reinforcing that engagement in a virtuous circle and thereby raising the lifetime value of each customer. Subscribers to Disney+ reached 86.8 million one year after launch, compared to the 60 – 90 million management projected to reach in 2024. To be sure, Netflix, Apple, and Amazon remain formidable competitors in new-era streaming entertainment (mind what we said about everyone standing up at once), but there’s fight left in this old dog.”

Our calculations show that Walt Disney (NYSE: DIS) ranks 11th in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Walt Disney was in 144 hedge fund portfolios, compared to 112 funds in the third quarter. DIS delivered a 2.78% return in the past 3 months.