9/12/11 Walt Disney Company (DIS): A bargain at 11.0 times 12-month forward EPS
11/17/11 Walt Disney Company (DIS): Fingers in every corner of the entertainment business

Walt Disney Company (DIS): Fingers in every corner of the entertainment business

By Paul Goodwin, Editor of Cabot China & Emerging Markets Report
From Cabot Wealth Advisory 11/17/11

My stock pick today is

Walt Disney Company (DIS), a media giant that has its fingers in every corner of the entertainment business. Disney owns ABC TV, ESPN, A&E, theme parks and resorts, produces movies through its Disney Studios and Pixar divisions, owns comicbook giant Marvel and licenses its products for toys, clothing and every other product that can have a picture of a princess affixed to it.

Disney is a formidable presence in the media business, generally growing revenue in the single digits (revenue growth was positive in eight of the last nine years) and paying a small dividend (trailing annual dividend yield was 1.1%). The company manages its vault of classic animated films with canny precision, offering them for sale on DVD only for a limited time and reviving them for theatrical runs as new generations grow into them.

DIS is a generally solid stock that mostly avoids big volatility, holding its value and providing a little income. Right now, the stock is favorably priced, with a P/E ratio of just 14, as the stock is only partially recovered from a five-month correction that included an uncharacteristic over-the-falls decline in late July and early August, when it was dragged down by a powerful market dip.

DIS can be pushed around a bit by quarterly earnings that reflect the success (or occasional failure) of a tent-pole animated feature. But the sheer scale of this diversified company (market cap is nearly $67 billion) reduces the danger substantially.

The rally that has lifted DIS from 28 in early October may need some time to consolidate in the 35 region. If you have a hankering for a bite of The Mouse, you should be able to get in near 34.

---

Walt Disney Company (DIS): A bargain at 11.0 times 12-month forward EPS

By Timothy Lutts, Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 9/12/11 Sign up for free Cabot Wealth Advisory newsletter

Turning to specific stocks, I will admit that this is a challenging time for me. The reason: the best charts today belong to conservative stocks, and I know from experience that once this negative environment has passed, those stocks will lose their allure.

So instead of using charts, I'm turning to Cabot Benjamin Graham Value Letter today to highlight a stock that's attractive based on valuation.

It's that well-known entertainment juggernaut Walt Disney Company (DIS), which is currently selling for 30% off its recent high.

Here's what Cabot Benjamin Graham Value Letter editor Roy Ward wrote in his latest issue:

"The leading entertainment company operates a multitude of giant theme parks and resorts around the world, as well as many other operations including a cruise line, television networks and movie studios. Disney recently opened a new resort in Hawaii and is building a new resort in Shanghai, China. Expansion is also in the works at its ESPN network, Disney World in Orlando and Disneyland in California.

During the past 12 months, sales increased 5% and EPS rose 15%. We expect Disney to pick up the pace and produce sales and earnings increases of 9% and 23% respectively during the next 12 months. Expansion and recent rate hikes at the company's parks and resorts will spur growth.

DIS shares are a bargain at 11.0 times our 12-month forward EPS estimate of $2.94. Larger box office sales and price increases could cause our estimates to be conservative. We believe the company's share price will reach our Minimum Sell Price of 56.21 within the next one to two years."

For the record, Roy advises buying anywhere under 36.41, which is his Maximum Buy Price. If you buy above that level, you lose your Margin of Safety. But if you buy below that level, and DIS climbs up to 56.21 within two years, that's a tidy 54% profit.

For more details, click here.

---

Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month

Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.