I was happy to hear the announcement yesterday by Disney (DIS). Their steaming service will clearly give Netflix a run for their money. I also like the little undercut in price which should incentivize consumers to get on board. I love the smell of competition.
Disney has several different studios to feed to their streaming service such as PIXAR, LUCAS and MARVEL. The content provided by these studios is well-known for their high quality and big box office revenue production. And….. DIS have lots and lots of top flight movies going back decades. Also, DIS will pull those movies off Netflix which will leave a hole in Netflix’s lineup. NFLX’s PE may be a little ahead of itself with a 132!
DIS has years of experience in the movie production business. While Netflix has gotten up to speed pretty quick, it will be hard to “square up” with the very long experience of DIS. It is also important that DIS is diversified in a number of businesses and not just streaming. Those dynamics will give DIS a competitive advantage.
In the January 4, 2019 issue of Barron's Jack Hough interviewed the CEO of Disney - Bob Iger. I found a lot of great information in that interview and decided to add to my position in DIS. I had originally established my position when the stock was down in 2008-09. That downturn was my “magic kingdom”. As any value investor, I love a sweet bargain and I am ALWAYS patient.
One of the hazards of value investing is that you are always looking for a cheap price for a great company. While I hoped DIS's price would drop further from the approximately 108/shr price it was in early January of 2019, it started to climb. When it finally fell back to the 108 price at the end of March, I pounced on it. I do think the current pop in price is a little precocious, but it was great to have added to my position at a reasonable price.
From 2008 to 2015, DIS climbed at a 45 degree slope, but went flat from 2015 to yesterday. It may be time for another growth spurt. It will take several years to get the streaming up to speed, but DIS has the “special sauce” – management by Bob Iger. The challenge will be finding a suitable replacement for Iger who plans to retire in 2021. Let’s hope DIS doesn’t get another Roy Disney to lead the company forward when Iger retires!
