Why I Chose To Invest in Disney
Today, I purchased shares in Disney (the Walt Disney Company (TWDC)) for my ISA. It’s an unusual investment for someone like me who is usually trading high risk shares in order to get the fastest returns. Disney is low-risk, a slow burner. But there’s not a company I’m more interested in.
Disney has become a giant over the last 11 years. Ever since the Pixar acquisition, Disney has been building a portfolio of the greatest IP in the world including Disney’s own IP, Marvel and Lucasfilm. Furthermore, the company is investing in emerging markets like South America and China. From a media standpoint, no company is better. Disney has the strongest studio entertainment division in the world and has the most successful sports broadcaster globally. The sheer amount of reach Disney has is unmatched.
With their strong IP, Disney have the most profitable consumer products division of any media conglomerate. Parks and Resorts are what most consider the best tourist destinations in the world. The experience Disney provide is unmatched and is the highest in customer satisfaction for any tourism company.
There are no doubt concerns for a new shareholder like me. While ESPN is still popular, trends in the industry prove that it’s days are numbered and unless action is taken, it will start to be a burden on the company. ESPN is what is keeping Disney shares from growing further. Shares have sat at the same 110 since 2015 despite Shanghai Disneyland opening and the success of Star Wars: The Force Awakens.
Disney are aware of this and are taking action. They purchased a minority stake in BAMTech which is a direct to consumer solution pretty much designed for ESPN.
In Parks and Resorts, the division is trying to acquire the European company Disney set up to run Disneyland Paris, Euro Disney. The company faces huge amounts of debt and a majority of it is to the Walt Disney Company. Just yesterday (March 14) a group of minority shareholders, accounting for 5% of shares, said they would not sell the shares to Disney, despite being offered options in TWDC and a 67% premium. This is alarming. What Disney are trying to do is save this resort. It’s vitally important to the company that it succeeds. TWDC have the expertise to turn it around but in order to invest in it properly, they need to own it. Clearly, the shareholders of Euro Disney have no idea that their company is nearly bankrupt and they rely heavily on TWDC for stability. In my opinion, I think TWDC needs to state an ultimatum to these aimless shareholders. Sell them the shares or be stuck with land they can’t use because Disney stripped the licenses. While this approach may be considered blackmail, I feel like the shareholders do not understand in the slightest what Disney are trying to do. It’s important for Disney to be aggressive.
I’m also excited for the future of the Walt Disney Company, there’s a wealth of great films in development at Studio Entertainment including Star Wars and the Marvel Cinematic Universe, not to mention the Live-action initiative which includes Peter Pan, The Little Mermaid and Lion King. Disney is investing in overhauls at Epcot and Hong Kong Disneyland, two areas in desperate need of attention. Finally, there are rumors that Disney is looking at distribution platforms, namely, Netflix.
Of course, it’s been proven that content is king but having a distribution platform does help. Though the track record for ABC has been mediocre, Disney wouldn’t be the size and value it is today without it. In a world where most content is consumed online, it makes sense for Disney to want in on a VOD service. That’s not to say they haven’t tried their own VOD. DisneyLife in the UK is quite successful, giving subscribers access to the Disney Vault, Disney Music and live Disney channels (not ESPN). The numbers of this service, obviously, do not compete with Netflix or even BBC iPlayer. Netflix has been valued at around $40bn. Which is a sizable chunk of Disney’s own value ($175bn), so it’s a big mouthful to swallow but it would be an almost guaranteed success.