Walt Disney Co. (DIS) has been charming children's hearts for decades, with its world-famous characters. And although today's youngest generation still enjoys the classics, tastes have changed. Yet this company has been highly successful in adapting its movies and entertainment strategy to modern day standards. Today, the firm has established itself as a globally recognized brand, with a diversified income strategy and a wide economic moat. But will this entertainment factory remain a win-win investment in the future?
Diversity to Reduce Risk
One of Walt Disney Co.'s key strengths is its diverse portfolio of renowned brands, the likes of which include ESPN, ABC, Walt Disney, Marvel Entertainment, Touchstone Pictures and Lucasfilms. In addition to this, the firm own a 42% stake in A&E, The History Channel and Lifetime Networks. These television networks and movie studios have laid the groundwork for the company's live-action and animated film production, but have also helped achieve a strong and steadily growing revenue stream. And with over half of all profits deriving from the entertainment networks, these brands are considered the company's backbone.
In this scenario, one of the key players is 24-hour domestic sports cable channel ESPN, along with ESPN2 and its sister channels. The popular sports channel reels in 75% of cable network sales at Walt Disney Co., due to its large viewer base of 100 million U.S. households. Also, ESPN benefits from a dual income stream, defined by advertising dollars and affiliate fees, leaving it at a competitive advantage over other broadcast networks that rely solely on ads.
Nevertheless, ESPN isn't all that Walt Disney Co. has to offer. In 2013 the company entered into content distribution agreements for its television series and movies. The deals with Comcast Corporation (CMCSA), Netflix Inc. (NFLX) and Charter Communications Inc. (CHTR) are meant to help strengthen the firm's multi-channel subscription model by increasing the platforms for content delivery. Additionally, this strategy will balance future revenue losses in the DVD segment, as a consequence of the cheaper viewing alternatives.
Theme Parks and Overseas Expansion
Walt Disney Co. undoubtedly has a talent for monetizing its characters and franchises across multiple platforms, but its theme parks are the crown jewel. These are an especially attractive and unique segment in the company's assets, mainly because they are almost impossible to replicate. The Parks and Resorts division accounts for 25% of operating profits and after the 2009 crisis, revenues have been recovering at a fast pace. During the last quarter of 2013, revenue in this segment experienced an 8.5% increase, while operating income marked a 15% rise. In fact, the company is focused on further deploying its capital towards the expansion of the Parks and Resorts business, thereby creating new growth opportunities.
Looking forward, Walt Disney Co. is aiming to expand its operations overseas, in the emerging nations China, Russia and India. The Shanghai Disney Resort, for example, will contain a Shanghai Disneyland, two themed hotels and a retail, dining and entertainment venue, and is set to be China's largest theme park by 2015. Despite possible unfavourable foreign currency translations, this firm should be able to sustain its growth given its multiple revenue sources. Furthermore, the entertainment giant has been highly successful at managing its cash flow, returning large sums of its free cash to shareholders via dividends and share repurchases. The 71.3 million repurchased shares in fiscal 2013, worth close to $4.1 billion, are expected to increase in 2014 and will range between $6 and $8 billion in returns.
Despite the risks of the economy deteriorating and primetime ratings fall, which could affect advertising dollars and revenue generating capabilities, I remain highly bullish about Walt Disney Co.'s future. The dual business model of theme parks and television networks, have contributed to a steady 40% revenue growth over the past decade, leading to a sum total of $45 billion in 2013. With a 20.50% operating margin and trading at a price premium of merely 14% compared to the industry's average, I believe this company has a bright future. Investment guru Ray Dalio (Trades, Portfolio) also put his trust in Walt Disney, as he recently acquired nearly 200,000 company shares.
Disclosure: Patricio Kehoe holds no position in any stocks mentioned.
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Alamy Protecting your knees is part of protecting your overall health, and protecting your health helps ensure your financial security. For runners, joint problems can creep up slowly, and runner's knee is among the most common. Even if you don't have minor pain or signs of weak knees, you'll want to take proper care of those joints -- especially if you're a runner. Bad form, injuries and nutrition can all contribute to gradually sorer knees, and sometimes osteoarthritis. You may think it's just a little pain to work through, but sore knees are often a sign of serious problems in the future. Ignoring that sign may cost you, in the form of a serious injury in the near future or a serious surgery in the more distant future. Either way, pretending it's no big deal is a risk you shouldn't take. For you, devoted runner, prevention and appropriate care mean you'll be a runner much longer. It means more miles, more races, more hours and more of that runner's high. It just might also mean more money in your pocket later. Here's why. 1. Knee surgery is insanely expensive. Not taking care of your knees can result in more than pain. Your knees might become deformed, or "bowed," from joint degeneration. Chronic inflammation might also result, which can make knee pain even worse. When that pain starts limiting your ability to carry out daily activities, or becomes unbearable, you might need knee replacement surgery. This is a major surgery with weeks of recovery time and physical therapy afterward, but more than 90 percent of recipients report rapid and substantial improvement.
Kristoffer Tripplaar/Alamy NEW YORK -- Lululemon Athletica's first-quarter net income tumbled 60 percent, stung by a one-time tax adjustment. Its adjusted profit and revenue beat Wall Street's expectations for the quarter, but the Canadian yoga clothing company lowered its full-year earnings forecast Thursday and said that Chief Financial Officer John Currie plans to retire by fiscal year's end. The company is also starting up a $450 million share repurchase program. Lululemon (LULU) shares skidded 15 percent lower in afternoon trading. Lululemon has been working on improving its business since last spring when it pulled one of its popular yoga pants from stores because they were too sheer, which it blamed on a style change and production issues. Fixing the problem cost the company millions and made investors question quality control. The earnings report came a day after Lululemon founder Chip Wilson said that he voted against the re-election of outside directors Michael Casey and RoAnn Costin. Wilson, who has a 27 percent stake in the Canadian company, said that he believes board changes are needed to help increase shareholder value. For the period ended May 4, Lululemon earned $19 million, or 13 cents a share. A year earlier it earned $47.3 million, or 32 cents a share. The company said that the current quarter had a tax expense of $52.5 million, which included a non-recurring adjustment of $30.9 million for the planned repatriation of foreign earnings that will be used to fund a buyback program. The tax rate for the quarter, including the one-time adjustment, was 73.4 percent. The normalized rate before the adjustment would have been 30.1 percent. Stripping out the one-time adjustment, earnings were 34 cents a share. Analysts surveyed by FactSet predicted earnings of 32 cents a share. Revenue rose 11 percent to $384.6 million from $345.8 million, beating Wall Street's estimate of $381.7 million. Sales at stores open at least a year edged up 1 percent. This figure is a key indicator of a retailer's health because it excludes results from stores recently opened or closed. Lululemon anticipates full-year earnings of $1.71 to $1.76 a share when taking out the one-time tax adjustment related to the planned repatriation. Its prior guidance was for $1.80 to $1.90 a share. The retailer also revised its revenue forecast to a range of $1.77 billion to $1.8 billion. Previously it anticipated $1.77 billion to $1.82 billion in revenue. Analysts expect full-year earnings of $1.89 a share on revenue of $1.8 billion. Shares of Lululemon declined $6.67, or 15.1 percent, to $37.61 in afternoon trading. Its shares have fallen almost 25 percent so far this year through Wednesday's close. For the second quarter, the chain foresees earnings of 28 cents to 30 cents a share on revenue of $375 million to $380 million. Wall Street is calling for earnings of 36 cents a share on revenue of $387.1 million. Jim Duffy of Stifel Nicolaus cut Lululemon to "Hold" from "Buy." The analyst said in a client note that the full-year and second-quarter outlooks suggest traffic at the retailer's stores is "on a slippery slope." Duffy said this makes it hard to plan the business and may lead to inventory exceeding demand. Long term, the analyst said that he still believes in the franchise's value. Lululemon said Thursday that it will work with an executive search firm to find a replacement for Currie, who had worked at the company since 2007. Currie will assist with the transition process.
Alamy Savvy consumers know that credit card debt is something to banish from your financial home if you can. But just how bad is your debt situation compared to others'?
Getty Images The evidence is in: According to a number of studies from banks and investment firms over the past decade, women make better investors than men. The most recent, from the tax and advisory firm Rothstein Kass, found that hedge funds run by by women outperformed those managed by men by 6 percentage points over a nine-month period in 2012. Why do women, on average, do better? No one knows for sure. And, of course, there are plenty of exceptions like Warren Buffett. But when tallied over the long term, women generally produce better investment returns than men. There are four likely reasons: 1. Men are more competitive. You'd think this would be a good thing, right? But as in so many areas of investing, the obvious answer is not the right answer. For many men, the most important thing is not the absolute return of an investment, but whether or not they beat their rivals. This often leads male managers to make riskier bets, which are less likely to pay off. The second most important investment criteria for many men is bragging about their returns. And as we all know, men are less likely to ask for advice. Somehow it's seen as a mark of weakness. All this leads men to focus on the short term and lose sight of the real objective of investing: producing consistent, positive returns over an extended period of time. 2. Women take fewer risks. According to research by behavioral scientists, women as a rule are more risk-averse than men. Women are more inclined than men to wear seat belts, avoid cigarette smoking and get their blood pressure checked. They are 40 percent less likely to run yellow traffic lights. So it should come as no surprise that women gravitate toward safer investments and hold stock portfolios that are less volatile. One investment study concluded that when things go wrong, men get angry, while women become more fearful. Anger can lead people to take action that will lead to more losses, such as doubling down on losing investments or trying to "catch a falling knife." By contrast, fearful women are more likely to avoid market downturns in the first place, and then if they do suffer losses they are more likely pull in the reins and step away from big disasters. 3. Women do more homework. Women are less confident than men, and therefore less likely to be deluded into believing they know more than they do. They want to be in control, and therefore do more research to find out exactly what they are investing in. Women also have more realistic ideas about what an investment can reasonably deliver. In short, they have lower expectations. Therefore, they are less likely to jump on the "next big thing" or fall for a "can't miss" stock tip. One report found that a quarter of the men surveyed admitted they would gamble on a "hot" investment without doing any real research, while only half as many women would make that same mistake. As a result, women trade less frequently. They incur fewer transaction costs and fewer tax consequences. Women commit to their investments, and because they've done their homework, are more likely to honor their commitments. They are more patient investors and typically do not get spooked by a short-term hiccup in a company's performance. 4. Women realize they are not in control. Surveys have shown that women are more likely than men to attribute success to factors outside themselves like luck or fate. This apparent contradiction – aiming to achieve control when you know you can only control so much -- gives women the perspective they need to avoid panic. And yet, paradoxically, it also allows them to admit when they have made a mistake. Women look out for the next storm. When it arrives they batten down the hatches and ride it out. They know the market is like the ocean. It is much bigger than any one investor, subject to huge global forces. But over time there's a certain ebb and flow, and if you're a good navigator you can sail on to richer shores. So how is it that the best investor of all, the legendary Warren Buffett, happens to be a man? Perhaps you should ask author Louann Lofton, who wrote the book: "Warren Buffett Invests Like a Girl: And Why You Should Too."
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