Why I Invest In Disney- Update
December 18, 2015
Disclaimer: I am not a Financial Advisor. I own several visors from several Financial Companies seeking my business, and I could add them together, and figure out how many I had overall. So I am at least halfway to giving you sound investing advice. I could also add my vices together, using similar logic, so you should obviously listen to me. This disclaimer should have had a disclaimer about how weird it became.
**The original article was published on November 10, 2015. This update starts with new information, up to roughly the current time of December 18, 2015**
When I originally recommended Disney stock, it was worth 116 dollars, about 5 weeks ago. It is now worth 108, so here is the explanation.
New info on ‘the down-side’
ESPN subscribers decreased by 7% over this past year, which will result in a loss of revenue.
As well, some of the licencing deals struck, with other companies regarding ESPN, were poorly negotiated and have been costly for Disney.
Pixar’s latest flick has so far, been its biggest flop in at least the last 7 years, although they will likely earn more than their money back, so it’s not like Ishtar or something…
Some people have made a lot of money over the past several years on Disney, and will sell their stock on the above information, called ‘taking gains‘, which has occurred over the past month.
(If you are Canadian, the dollar continues to struggle, compared to the US$, so you may take a 20-25% hit right away to your stock purchasing power. However, it is hard to determine when our dollar will come back)
New info on ‘the up-side’
Star Wars has broken the USA Single Day Movie Box Office Record, and may go on to break all the records. It won’t be released in China until January, 2016.
Most feel that this edition of Star Wars will make Disney at least 2 BILLION, and some feel it may earn as much as 8 BILLION, in addition to incredible sequel potential. Some experts feel if Star Wars makes over 2.5 BILLION it will offset any losses, and then some, from ESPN.
Disney has also partnered with ALIBABA (think Chinese Amazon) to distribute Disney movies and media. This is just in time for the soon to be opened, largest theme park of its type in the world, Shanghai Disney.
Some analysts continue to put a target price on the stock at around 120-125 dollars a share, over the next 12 months, if Star Wars makes over 2 BILLION. That is about 15% higher than its current share price.
Just some food for thought and an explanation of why the stock went down recently, and now on to the original article…..
Let me start again.
A shrink offering free financial advice? That sounds so crazy it just might work!
Everybody loves free advice, as it is usually worth about as much as you paid for it. I hope in this case, I have some credibility, as you may have found that I provided other advice to you prior that made sense.
Of course I can’t guarantee my advice will make you rich, and any time you are investing money, there is a great likelihood you may also lose money, but this is certainly safer than taking your $1000 to Vegas. As well, I invest in Disney myself, so at least we will both be going down with the ship.
Money in general is a pretty scary topic. A very small percentage of the globe has most of it, and for the rest of us, it never feels like enough. And there are so many places to put it, from under the mattress, to Real Estate, to funding a Start Up of some kind.
The reason I am talking about the Stock Market today, is because I personally think it may be an easier and profitable way to invest money. Besides, I have a whopping 2 years of experience, although I am a quick study, especially during a Bull Market.
The terms ‘Bull’ and ‘Bear’, refer to what the Stock Market may be doing. Bull means things are looking good, Bear means thing are going south. I always think of a bad Market day like a rectal exam. It’s an unpleasant memory cue that reminds me; ‘Bear Down’.
I do have other money invested in other ways too, and I have friends who have done well investing in Real Estate, but it often requires a considerable sum to start. You then may have to worry about tenants, and upkeep.
It will cost you less than 10 dollars to buy stocks (also called EQUITIES) through most websites, and individual stocks may vary in price, most being between 25-300 dollars. It costs the same amount to buy 1 stock as 1000, as the 10 dollar fee is a flat charge.
The Stock Market can be a scary topic because your brain almost always automatically adds the word ‘Crash’ to the end. We recently witnessed a Stock Market Crash in 2008, and there have been 1 or 2 ‘corrections’ (daily fluctuations in the entire Stock Market of greater than 10%) since then.
There are also occasional reports of Insider Trading, Rumors, and even outright Fraud committed by companies, as the recent VW scandal proves.
The way I think about the Stock Market, is kind of like how you think about your safety deposit box. I just pick something I think is valuable, except this time it is a company, and I buy some stocks, and then forget about them. I don’t really think I know enough to encourage you to Day Trade, I favor the George Foreman approach of ‘Set it and forget it’. This is termed, in Stock Market lingo, as ‘Taking the Long View’, and by long, I am talking about 10-30 years.
In fact, taking the long view even protects you against Crashes like we saw in 2008. If you were heavily invested in the stock market at the time of the big crash, and you did not sell a thing, many of your investments have recovered, and then some.
You are probably already in the Stock Market, in some way.
If you are buying any products from Disney, then you are helping me, and I appreciate your business. Owning a stock is literally investing some of your money in the company, thereby owning a part of the company.
The main way you are likely involved in the Stock Market though, is if you own RRSP’s or TFSA’s. If you have money in either, it can be invested in many ways. Some people keep it as cash, but unless you are going to need it anytime soon, that does not make a lot of cents.
It is far better to, at the very least, have your money in Bonds, as they are likely to pay more interest, and are considered essentially ‘safe’, although that may be debatable. You will never get rich on bonds these days, as they generally almost never pay more than 4% per year in interest.
If you have RRSP’s, they are most likely invested as Mutual Funds. Mutual Funds are like a grocery checklist. They often contain several stocks from well known companies, like Coca Cola, or Wallmart. You can get Mutual Funds that just mirror what the general Stock Market is doing, or you can pick a ‘Sector’, like Technology, or Health Care.
Mutual Funds generally do okay, however the math behind them often favors the Bank, who is buying the Mutual Fund on your behalf.
A simple explanation is as follows. Mutual Funds often have a ‘Management Fee’, or MER, which is expressed as a percentage, or fee, that you pay every year you own the Mutual Fund. Canada has some of the highest MER’s, as high as 2.5% for some funds. This fee is deducted from your overall total every year, whether the Mutual Fund makes money or not.
If we imagine a scenario, where the Mutual Fund was successful, and generated a 5% return every year, over the span of 10 years, it sounds pretty good. What you don’t realize, is that if you examined your profits over that 10 years, you would determine that you put up 100% of the money, took 100% of the risk of losing it, and only kept 50% of the profits (as before you are paid, the bank collects 2.5% *or half* of your 5% gains).
The bank also collects a scalper’s bonus, called a ‘Trailer Fee’, for selling you the Mutual Fund, in the first place.
I personally prefer to cut out the middle person, in this case the Bank, and I use my internet connection from home to buy Stocks. There are many sites that are free to use, and most major Banks have an Internet Banking Site, with a link to ‘Direct Investing’.
I believe the Stock Market is generally safe, if you invest in companies that make money, and are highly unlikely to go broke. There are many other companies that I could be recommending, as I do have other stocks in other companies, I just feel some strong factors push Disney to the top.
So here are some of the reasons that I picked Disney.
Disney owns a lot of shit
Disney is an amazing company that owns more than a few cartoons. It has become a sprawling media empire, with fingers in almost every soup. Let me go through some categories.
Disney Own Star Wars
Disney owns all things related to Lucasfilm, Industrial Light and Magic, and Lucasfilm Amination. Just in case you were not aware, there is a new Star Wars movie coming out, and it might be successful, and likely spawn an entire generation of loyal fans for many years to come.
Disney Owns ABC
Disney owns the ABC channel, in the US, as well as ABC Entertainment. They also own other channels, such as the A&E Networks, which includes A&E, The History Channel, and a bunch of others.
Disney Owns Professional Sports
Well that is a bit of a stretch, as I am sure that Nike would have something to say about that. But Disney does own ESPN, which is by far one of the leaders for cable sports entertainment.
Disney owns Marvel
That little black and white mouse also owns the rights and profits behind all of the those amazing Superheroes. Disney will be making money for many years to come, as the Superhero movies keep coming out, many with multiple sequels, and dazzling special effects.
Disney owns Pixar
This little company, originally founded by Steve Jobs, is an amazingly successful company all by itself.
Disney dominates at the Box Office
Disney is a content generator, meaning that it can use all of the aforementioned companies to make original content that it can then sell or rent out for tons of cash. They can sell subscriptions to their channels, and websites, or they can rent content to other companies, like Netflix. They own several other studios, including Silver Creek Studios, as well as Touchstone Pictures, for distribution.
They can also distribute their merchandise in many ways, as there are many Disney Shops in every mall, 5 Major theme parks (2 in USA, 1 in Paris, 1 in Hong Kong, 1 in Tokyo), as well as several other resorts, and a Disney Cruiseline.
They own a bunch of other stuff too, including Avalanche Software, and Hollywood Records, to name a few, but I think you are getting the general idea.
They are masters at Branding
One of the ways a company can guarantee they will have loyal customers is branding. We are all aware, if we have children, that Disney makes a lot of popular movies, and introduces your children to many memorable characters, such as the ubiquitous Disney Princesses.
These days, one of the most successful ways to brand youth is through the Internet. It is incredible how much of our children’s time on the internet, is spent viewing cleverly disguised commercials.
The example below is a friendly person, likely paid by Disney and YouTube, to sell Disney Play Doh. It is a very cute video that I saw my 4 year old return to, more than once.
That video has almost 400 million views.
The Stock itself is not very expensive
Without getting too technical, there are many math principles applied to how a stock can be described. One of the simplest guides to whether or not you are getting a stock at a really good price, relative to how much money that company is making, is called the P/E ratio (Price to Earnings Ratio). Generally, if this number is over 40, the stock is very expensive for how the company is doing. If the number is under 20, you are generally speaking, getting a pretty good bargain. Disney’s current P/E ratio is 23.
Disney Stock pays an Annual Dividend
I mentioned somewhere before that buying a stock is like buying part of a company. Buying a stock is literally giving a company a loan, helping to fund the company. The company appreciates the loan, and in some cases, will give you interest back on your loan, called a DIVIDEND.
Disney pays you back a Dividend of 1.3%, meaning that no matter what, you will always get a check every year, for 1.3% of the amount you originally invested. You can also opt for that money to automatically be reinvested to buy more stocks, called a DRIP.
There are many other stocks that pay higher Dividends, some as high as 10%, so please look into this a bit more yourself, as your research is the most important thing.
The Stock is going up
Disney stock has been doing very well for a few years. From 2007-2011 it stayed around $30 a share (or stock), and then it started to take off.
From 2012 to 2014, it went from $41 up to $67. The stock went up by about 60%. This means that if you had invested $10,000 in 2012, your shares would be worth $16,000.
If you had invested $10,000, only at the start of 2014, it would have grown to almost $17,500, because in the past 22 months, the stock has gone up almost 75% (from $67 to $116)
If you were lucky enough to invest 10 grand in 2012, and kept it until today, your Disney loan would be worth around $30,000, as the share price has almost tripled, since 2012.
Stock market collapse is unlikely, and will destroy your mutual funds as well. If the entire Stock Market collapsed, it would be because of a civil war, and there would likely be bigger things to worry about.
There are many smart people that believe the entire Stock Market is overpriced, and there will be a big correction. If that is the case, again, in 5-10 years, things are likely to rebound some, or perhaps even more. If you are worried about this, click the graph below, to read more about it.
Whatever you decide to do, the main point of this essay was to provide my opinion about how to think about your finances. I hope you also do your own research, and ask the experts as many questions as you need to, so you gain an overall sense of what the heck they are doing with your hard earned money.
Simon Trepel, MD
Simon Trepel, MD FRCPC, is a practicing Child and Adolescent Psychiatrist, in Winnipeg, Canada. He is an Assistant Professor, at the University Of Manitoba, in the Faculty of Medicine, and the Co-founder of the GDAAY Clinic. He is, more importantly, the proud Father of 2 beautiful Daughters. He writes in his spare time about things he knows something about, and occasionally about things he doesn’t; like Yoga, and Italian flavored coffees. This list also probably includes the Stock Market.
Check out his Blog, called Simon Says Psych Stuff, at