Time to Buy Disney?

It might be time to buy Disney.

There are a few basic principles that I operate by when it comes to investing, and there’s actually nothing complicated about it. In fact, it’s all common sense. It’s just a matter of whether you (as an investor) are able to control your emotions, your greed and fear.

Some of my personal investing beliefs that I operate by:

  1. Opening up a quick trade during earnings to try and hit big is like gambling, there is no place for that in the disciplined investor’s world.
  2. You should always have a plan for what you’re going to do with the available cash in your portfolio.
  3. Keep a “watch list” of stocks that you’d like to own and monitor them regularly in case the market hands an opportunity.

These 3 principles of mine are all relevant.

When companies are reporting earnings…

The market can be unpredictable. You can play some short-term trades and make big money, or just as easily lose money which will leave you with 2 options:

  1. Cut your losses
  2. Try and make your $ back

We just came out of earnings on many companies and instead of opening up some short-term trades to play earnings, I let earnings season ride out. Good thing I did, Disney is now presenting a buying opportunity.

Always have an investing plan

Every investor should always have a plan for their investment portfolio. There is nothing wrong with holding cash, but you should know why you’re accumulating cash and have a plan on what to do with it. After all, cash is not a productive asset.

Because the US dollar is so strong right now, it’s only worth it for me to buy US stocks only when a significant buying opportunity is presented… like Disney’s stock today. Otherwise, I would buy more Canadian traded funds and stocks to avoid getting hit on the exchange rate.

Keep a “watch list” of stocks

Disney is a stock I’ve always wanted to own.

So what happened with Disney today?

On Aug 4, 2015 after markets closed, Disney reported Q3 2015 results and the market wasn’t so kind. But was it really that bad?

Time to break-down Disney’s earnings:

  • Revenues of $13.1 billion (compared to $12.5 billion prior-year quarter)
  • Record Q3 net income of $2.483 billion (compared to $2.245 billion prior-year quarter)
  • Record diluted EPS $1.45 (compared to $1.28 prior-year quarter)

Disney’s revenue fell short of analyst’s expectations of $13.2 billion but beat EPS expectations of $1.42.

You’ll read some news releases that say ESPN subscribers decreased but wow…….. was it really all that bad? It was a solid quarter of growth, but I guess the market just wanted more.

That’s fine… it gives us an opportunity to buy a strong company at a discounted price.

Disney chart

If you want more information, have a look at Disney’s Investor Relations page or go straight to Disney’s official Q3 2015 results news release.

What Disney is planning next

Shanghai Disneyland is set to open in spring of 2016 and Disney currently estimates 25 million visitors in the first year of operation… just imagine how much good that would do for their business! And then imagine the stock following suit 🙂

You can watch 2 trailers on Disney’s site for the next Star Wars movie set to come out later this year in December… Star Wars: Episode VII – The Force Awakens.

Disney’s always got cards up its sleeve on how to generate money.

The bottom line…

Disney just finished reporting earnings. You can feel free to make a purchase now, you’re definitely getting a good price. My gut is telling me to wait a bit longer and make sure all of the emotions have washed out.

My plan is to give it another week or so and make my purchase then. As soon as my purchase is made, you’ll see me update my options holdings in my Investment Portfolio page. I will be buying a 2017 call option likely $130 strike.

There is no predicting that Disney’s stock might spike back up tomorrow and I lose my chance, but I’m fine with that. If it trends lower, even better. It’s more important to me to let all the volatility and downside pressure wash out.

Good luck and decide for yourself if this is a stock you’ll want to own! It’s days like these when the market discounts a strong business that makes me feel so happy to be an investor 🙂