When Walter Elias “Walt” Disney founded The Walt Disney Company (back then, Disney Brothers Cartoon Studio) back in October 1923 together with his brother Roy, neither of them would have expected the company to be operating at the scale it is today.
What started as a modest cartoon studio is now one of the biggest franchises in the world, with numerous theme parks, a plethora of merchandises and major blockbuster movies. The franchise even discovered a line-up of talents that now grace the film and music industry, including the likes of Justin Timberlake, Selena Gomez and Britney Spears who started out from The Mickey Mouse Club.
While most people these days grew up having visited Disneyland, watched a Disney movie or even collected merchandises carrying the Disney brand before, few have thought of it as an investment opportunity.
As a value investor, one of the principles that we strongly believe is that we invest in a company that is within our circle of competence, or in other words, a company in which we understand its business model, how they make money and how they operate in general.
And since Disney is a name that is no stranger to most people, especially if they are a parent, here are 5 reasons why we should consider investing in The Happiest Place on Earth.
1. They are present in different parts of the world
Say the name “Disney” in most parts of the world and we can bet our bottom dollars that people will know what you’re talking about.
Granted, they only have 11 theme parks altogether in different parts of the world (5 of them Disneylands). However, what we can also see is that people from other parts of the world would make it their lifelong dream to visit one of these parks. This shows us how big a part Disney plays in most people’s childhoods, regardless of which part of the world they come from.
While most of us grew up seeing, hearing about and dreaming of visiting the original theme park in Anaheim, the franchise has since opened three theme parks in Asia and one in Europe, making the “Disneyland dream” more achievable for most people.
2. Diversity in business model
The key to a strong investment portfolio is to diversify our stocks, in that we invest in stocks from different industries. That way should something happen to a particular industry or company, our investment portfolio will not take a direct hit from us putting our eggs in one basket.
The same goes for business, especially for big conglomerates. Few businesses can massively scale by selling one thing and one thing alone and even if they do, they rarely stay around for long.
Disney, understanding this principle, scales their business in differing directions to ensure that their business remains sustainable. Whether they are operating a theme park, producing a new movie, acquiring the rights to a company, character and franchise or selling merchandises like the collectible Tsum Tsum, the company is undeniably still growing despite having been around for decades, thanks to their diversification strategies.
3. Most families know it
One way or another, the Disney name has been in our lives, be it in the past or the present.
Perhaps we have bugged our parents to take us to Disneyland or to the cinema to watch the new Disney movie as a child; Or perhaps our young daughter asked for the Princess Elsa dress from Frozen last month, simply because her friend has one.
Be it movies, toys, costumes or other Disney merchandises, the brand has come to a reach so wide, it is almost impossible for consumers to ignore.
4. They own big movie franchises
Apart from Disney Originals like The Lion King, Pirates of the Caribbean and Frozen, the company have also acquired in the recent years, Pixar Animation Studios, Lucasfilm from George Lucas (including the properties for hit franchises, Star Wars and Indiana Jones) and Marvel Entertainment, who shook the ground this year with movies like “Black Panther” and “Avengers: Infinity War”.
Merger and acquisitions have been long known in the industry to be a risky move, especially for big companies, as the attempt for diversification may sometimes turn into “diworsification” (the example of Toys “R” Us comes to mind)
Disney however, seem to have been doing it right all these years and appear to be scooping their way through major movie franchises in the market.
5. They continue to develop
Despite already being a big and successful company, Disney is in no way complacent and continues to branch into new things.
Just recently, Garmin International, Inc, in collaboration with Disney, announced the new vivofit jr. 2, a fitness tracker for kids, featuring princess-themed bands and interactive mobile app, which allows children to unlock app adventures, games and step icons by achieving a set amount of activity minute goals.
While staying in the business they are familiar with (theme parks, movie productions and merchandises) may seem like the wiser move, Disney is also aware that the company should stay relevant in the digital age and test out new things.
Being a successful company with an almost century-old history behind it is certainly no easy feat.
And yet somehow, there is something in the Disney magic that managed to keep the company alive until today.
Do bear in mind however that, like any other business, Disney is also exposed to its own set of risks.
Watch the video below if you’d like to know more about the stock insights of this beloved company from Sean Seah, founder and CEO of VIC and why it’s in his personal list:
STOCK IT UP Episode #10 – Disney
For a renowned company with 5 different business segments, Disney is definitely one of the most easily recognised and well-loved companies in the world!Whether or not you’ve been to their theme parks or even watched their movies, Disney is no doubt a magical company that we all can relate to. With potential growth, increased earnings for the past 10 to 20 years and consistent dividends payout, Disney has proved itself to very strong and stable company. In today’s episode, VIC’s team leader and Asia’s Buffettologist Sean Seah is here to share with you more insights on why he absolutely loves Disney!If you are a fan of Disney, you don’t want to miss what Sean has in store for you! ————————————————————————And if you love Disney as much as Sean does, leave us a comment below and say what is it about this company that you particularly like!
Posted by Value Investing College on Tuesday, 4 September 2018
With all that you’ve learnt about this particular company, would you consider to invest in Disney? And to be more specific, wouldn’t you like to know how to start investing in their stocks or even find out how companies such as Disney payout their dividends to shareholders?
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