One company I’ve had on my watch list for a long time has been blue chip technology company Walt Disney Co. (NYSE:DIS). This media and entertainment juggernaut holds an unparalleled portfolio of intellectual property. The company’s brands and assets are irreplaceable and extremely valuable. Disney has continued to top my watch list in recent years. However, I have chosen not to nibble on this giant during this pandemic for the following reasons.
Disney’s core problem of late has been an empire building mentality from its management team. The company began to acquire non-core media assets, namely ESPN, using its excess cash flows to grow Disney’s overall footprint. However, these types of acquisitions did not necessarily increase shareholder value.
Instead of increasing Disney’s dividend substantially or investing in new brands and expanding the company’s content offering, Disney’s management team has misallocated capital. The company is now stuck with assets that have a long payoff period.
The coronavirus pandemic has also produced significant headwinds for Disney. These include restrictions in the company’s theme parks and cruise businesses along with delays for movie releases. The company has also had difficulty creating new content for its Disney+ platform. These issues have caused hesitation among many investors even at this current stock price.
Disney will be a long-term winner. However, I’d recommend investors take their spot with Disney and invest when comfortable with the company’s 12- to 24-month outlook.
Invest wisely, my friends.
