Another Dip Nibble

By Travis Johnson, Stock Gumshoe, February 10, 2016

Just a quick note to register that I bought a few more shares of Disney (DIS) after the post-earnings dip below $90. I continue to think this blue chip management team and collection of brands and assets is worth owning for the long term, and that current pricing assigns too high a panic level to the “ESPN Problem”.

ESPN is indeed an issue, both because they paid huge sums for sports events and because the subscriber count is lower than had been projected when those sports deals were made and may continue to decline because of the continuing “debundling” movement and “cord cutting.” I think this will obviously be a management challenge for Disney, but the company’s leadership has proven that they can adapt and manage new media and new technologies and continue to nurture strong brands and assets, and the NBA and NFL and college football remain, through the rights fees they paid, tremendous “assets” that are worth a lot to viewers and fans… maybe they overpaid, time will tell as non-cable pricing models evolve, but, to be fair, if you’re judging investments that means Disney also dramatically underpaid for Lucasfilm and Marvel. DIS is not really a “value” stock, you’re still making assumptions about their ability to continue to grow, and I think it will. Buying Disney at these prices, to my mind, assumes some trust in management, and assumes that cord cutting will be gradual — I’m comfortable with those assumptions.

This is generally how I’m coping with the weak market, I’m not making any large commitments because I don’t see anything that seems to me like it’s “no brainer” cheap and I have to jump in with both feet… but I’m taking little nibbles here and there, fully expecting that I’m going to miss the “bottom” but that stocks I find appealing, which have strong long-term prospects, are worth building positions in gradually as prices erode.

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