Disney: A Valuation that Cannot be Ignored

05/17/2016 8:00 am EST

Focus: STOCKS

Charles Carlson

Editor, DRIP Investor

One of the myths about investing is that the stock market is only for the affluent. But the fact is that everyone can invest in the stock market, asserts Chuck Carlson, editor of DRIP Investor.

DRIPs and direct-purchase plans have been and continue to be excellent door openers for all people — young and not-so-young, wealthy and not-so-wealthy, the “haves” and the “have nots” — to participate in the stock market.

And best of all, you can invest in quality companies. For example, one of my favorite companies right now is Walt Disney (DIS). There’s a lot to like about Disney.

Its movie operations are on quite a roll. While Wall Street expected the company’s first installment of its Star Wars franchise to do well — and it has to the tune of more than $2 billion in worldwide revenues — recent offerings have done much better than expected.

Indeed, Zootopia is nearing the $1 billion market in worldwide revenues, while its latest film, The Jungle Book, did $230 million worldwide in its first weekend.

The pipeline of attractive movie products is well-stocked for the next several years, so this business should continue to crank out big gains.

The company’s theme park business remains quite strong, and that business should get a boost from the opening of Shanghai Disneyland in June.

Broadcasting business, headed by its ESPN sports-programming franchise, seems to be the one sore spot with investors. I think fears over cord cutting and its impact on ESPN are a bit overdone.

Content matters, and Disney will figure out over time the best way to maximize the value of ESPN and its other content in the changing world of media distribution.

One thing that is not being fully appreciated by Wall Street is the power of the Disney “ecosystem”. The full power of, say, the Star Wars brand is not just in the movie business, but\ also across other businesses.

The company’s consumer-products and licensing divisions benefit from toys, games, apparel, and other goods that evolve from Stars Wars (and Frozen and other movie properties).

And the theme-park business benefits from new attractions built around successful movies characters and franchises.

Disney is a stock for all ages, and its investment requirements make it accessible for every investor. Indeed, minimum initial investment in the direct-purchase plan is just $100.

And Disney will waive that minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of $50. There is a one-time enrollment fee of $20.

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By Chuck Carlson, Editor of DRIP Investor

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