If we could only invest in one share, it’d be Walt Disney Company!
If we had to choose just one stock to be able to invest in, at the expense of every other share in the world, it’s not a hard decision which one we’d choose. We have a clear favourite. That share is Walt Disney Company (NYSE:DIS).
Now Disney is not great on dividends/income. Typically they pay 1% per year and UK holders like us are also subject to withholding tax at 30% (or a reduced rate of 15% if you apply). Also this isnt a share that’s going to have you excited on a daily basis with big jumps in value in a short time. What we have experienced though is a prolonged steady and reliable growth over the long term. In the last year alone, our investment in Disney has grown by around 35%. And it just keeps steadily ticking up in a workmanlike fashion with no fuss, and no big surprises. We’ve not been invested much longer than that, but those that have will be very happy indeed as that’s been the story for the last 3 years.
Just look at that chart! That’s the kind of chart pattern we like. From $30 a share in late 2011 to around $90 a share now in 2014. Even last year you could buy in as low as $50. For a huge company like Disney, this is impressive sustained growth. Compare it to the measly savings rates in UK bank accounts nowadays and it’s the closest thing to a no-brainer that you can get in the world of investing. In our opinion anyhow. Especially considering what Disney have coming the next few years.
Undoubtedly to us the major driver in the recent share price inflation is the outstanding performance of their film division. In particular, since they bought Marvel they have enjoyed incredible success with their superhero movies. So far since the Marvel acquisition they have released 10 ‘Marvel Universe’ movies banking a total of over $7 billion worldwide. 2012’s Avengers Assemble alone banked over $1.5bn. Perhaps the biggest surprise hit of the year in movies for 2014 was Guardians of the Galaxy, which has so far garnered $633m off a budget of $170m. Also this year Captain America: The Winter Soldier was a huge hit worldwide with box office receipts of $714m. With Avengers 2 slated for release next Spring, and a schedule of around 3-4 Marvel movies a year this is going to be a very lucrative source of income for years to come.
Perhaps equally as exciting as the Marvel franchises, Disney are now also the owners of Lucasfilm and have a slew of new Star Wars films lined up for the coming years. With the right touch, these could be at least as big as the Marvel films.
Couple these enormous blockbusters with all of Disney’s other income streams – home media, the theme parks, the toys etc. and it’s a company that’s just getting bigger and better all of the time. It’d take a brave man to bet against the share price not performing similarly over the next three years.
Of course as with all shares there are risks. Perhaps the next batch of movies wont be as well received and sentiment will turn. At a P/E ratio of around 20, the shares arent particularly cheap (though nor particularly expensive in my view for a company growing like they are). It’d certainly be a big disappointment to many if Disney’s take on Star Wars doesnt live up to expectations. We are positive on the company though and are looking for an opportunity to add to our stake – especially with Sterling being quite strong against the dollar at present.
Disney isnt a stock for traders, but as mid to long term investors we rate it our favourite. Traders will prefer more volatile stocks where you could see that kind of gain of 35% in days or weeks instead of a year, but the difference is the risk level. We’d rather take a steady 35% over a year on a share that we can just buy and forget, than trying to time a volatile, risky share that’s rapidly moving up and down. We have a share that’s made us 35% in a matter of weeks in UK Oil and Gas (LSE: UKOG) but it’s a far riskier investment than a share like Disney, and requires a lot more effort and risk on our part.
As always you must always do your own research before buying any share. All shares can go up as well as down and your money is at risk when placed in the stock market. We are not a stock picking service and do not advise you to follow our own investments.
Disclosure: We are long term holders of shares in Walt Disney Company and UK Oil and Gas.