In Portfolio Spotlight Series 2 – I will be going through each holding in my portfolio v2.0 and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free csh flow, strong competitive moats. These are core holdings.
2. Potential growth companies with breakout earnings, growing competitive moats. These are holdings which typically are kept within 5% of the portfolio.
3. Geographical / sector diversifications. These are meant for diversification purpose and are kept within 5% if they are from emerging markets (e.g. China/HK) .
Next up in Portfolio Spotlight Series 2 is DIS. It currently occupies 8% of my portfolio and I have strong conviction in this stock mid to long-term.
The Walt Disney Co. is a diversified international family entertainment and media enterprise. It operates through the following segments: Media Networks, Parks, Experiences and Products, Studio Entertainment and Direct-to-Consumer and International (DTCI). The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, radio networks and stations. The Parks, Experiences and Products segment owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. This segment distributes films primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners. The DTCI segment licenses the company’s trade names, characters and visual and literary properties to various manufacturers, game developers, publishers and retailers throughout the world. It also develops and publishes games, primarily for mobile platforms, and books, magazines and comic books. This segment also distributes branded merchandise directly through retail, online and wholesale businesses. The company was founded by Walter Elias Disney on October 16, 1923 and is headquartered in Burbank, CA.
1)Consistent Revenue Growth
2)Consistent Free Cash Flow
DIS has been having consistent free cash flow for the past 3 years. FY2019 was red due to closure of its parks during COVID 19 pandemic. FY2020 has been a revelation due to the popularity of Disney+
3)Market Cap Growth
As of September 2021 Walt Disney has a market cap of $225 Billion.
4)Consistent Net Income Multiple
DIS has had consistent net income multiple. FY20 was a one-off due to the closure of its parks and cruises as a result of the COVID 19 pandemic. However, this is only temporary and Disney will recover and resume its consistent trajectory. This indicates a management team which is efficient in handling its bottom line. A great management team is very important!
5) Future growth
This last factor is fundamental analysis. Does DIS have future market growth driver(s) ? The answer is yes !
Most of DIS future growth drivers will leverage on
- Theme Park , Cruise Line Reopenings
- Continued Business to Consumer business division expansion
- Hulu, and