With a strategy focused on long-term, diversified portfolios Chris Quigley, is a value investing expert and contributing editor of The Prudent Speculator. Following the recent Bank of America Merrill Lynch conference, he reviews two out-of-favor stocks involved in media, entertainment and theme parks.
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Walt Disney (DIS) fell after CEO Bob Iger offered details of the company’s plans for the future at a Bank of America Merrill Lynch conference in New York.
On the topic of streaming, Mr. Iger said the company plans to have two services, one for Disney and one for ESPN. We think Disney has done a solid job maintaining quality sports programming, acquiring TV deals and demanding premium fees from consumers and cable companies for their streams.
On the motion picture front, Disney’s Beauty and the Beast remake had terrific reception from fans, while Thor: Ragnarok, Coco and Star Wars: Episode VIII drop later this year (followed by Star Wars: Episode IX in 2019).
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While ESPN continues to be a concern for investors, as evidenced by this week’s drop, we believe that the emphasis on streaming and the draw of live sports will ultimately benefit DIS and its shareholders.
We still like Disney’s diverse revenue stream, loyal fan base, solid portfolio of franchises and unrivaled ownership of priceless content.
Though Hurricane Irma has disrupted Disney cruises and temporarily closed the Orlando theme parks, we feel that the company — for lack of a better term — will be able to weather the storm.
Of course, the relatively disappointing outlook for the current quarter was not well received by short-term-focused investors, and we have trimmed our Target Price to $134, but we think DIS should be a core holding in nearly all portfolios.
Like Disney, Comcast (CMCSA) isn’t doing too hot either. Comcast, a media giant, theme part operator and internet service provider, also attended the aforementioned Bank of America Merrill Lynch conference, and also managed to spread panic amongst investors after warning that the company expects substantial subscriber loss in the current quarter.
Although CMCSA shares took a haircut of more than 7% on the news, we continue to like the company’s overall trajectory, which in our view is propelled by its diverse media portfolio (including NBC, Telemundo, E!, NBC Sports Network) and geographically diverse theme parks (Universal Parks & Resorts including Universal Studios Hollywood).
Comcast’s quarterly dividend, which was bumped up in the beginning of this year to $0.1575, results in a 1.7% yield. Our target price has been edged lower to $44, but we think the recent plunge was overdone.
