Last week was wild, a couple of words during the Disney conference call led to a huge sell off in all media stocks. Disney went from $121/share down to $105/share before recovering later in the week. The drop was caused entirely over fears of ESPN/ABC etc losing cable subscribers.
I purchased a little over $3000 @ $108.39/share. (I already owned some shares) I thought it was a great time to buy more shares for several reasons.:
- Its the top media company. DIS has rich content in sports, animation, film, content etc.
- It reported a fantastic quarter. EPS +13% qtr over prior year quarter. YTD vs py YTD up 16%, 19% if you take out one time charges. And the prior year comparison included Frozen.
- The next episode of Star Wars comes out in Dec and it may well be the most profitable film in history. I expect we will see a huge blockbuster in Q4 and on into 2016. Then an episode of Star Wars or a Star Wars spin off comes out every year for the foreseeable future.
- Disney China opens up shortly and will impact earnings in 2016.
- Disney has a history of being big buyers of their stock when the price drops, I suspect they will be big buyers here.
Look, yes we may see some cord cutting, but its going to take some time to happen in a meaningful way. And there is every reason to believe that Disney will be in a great spot to profit in this bold new world, they specialize in content and monetizing that content. Disney will be well positioned in a cord cutting environment.
I could see some additional turbulence in the stock market, but Disney is now down about 10% and they will be in there buying.
I trimmed out half of my position in DOW. I really like DOW over the long term, but the market is just hammering all industrials. There seems to be a repricing going on that factors in a slowdown in China. I think there is additional downside in the market that could continue to bring down DOW and I felt as though Disney had more upside. (Plus we own a fair amount of GE, Boeing, and Berkshire Hathaway.B)
I sold half of my position in Verifone. Its getting hammered, clearly the market believes this is a company that is getting hit by the strong dollar. When I bought Verifone, I thought it was a good time to get in as the credit card companies are pushing merchants to install smart chip readers, and I thought Verifone would benefit. Buy selling some Verifone, I open up some cash to buy Apple as a play in part on the growth of Applepay.
My Shopping list:
- Raise some additional cash. I am going to look very closely at what stocks I own. I really think the market is headed for some tough times between now and Oct. There is a high probability that the fed tightens in Sept, Aug is usually a soft month, the averages arent acting very well, and October at least has the reputation for being bad. Unless I really love a stock, I am going to get rid of it. I think now is a good time to have a little more cash than normal on hand to pick up bargains if we get a selloff.
- I may pick up some additional Apple shares. Apple is cheap on a PE basis trading around 12x’s earnings, 10x’s if you back out the cash they have on hand. They had a big quarter in terms of growth, earnings, and free cash flow. Even if growth slows down there is a ton of free cash flow for Apple to increase dividends or buy back stock. And Apple has a very good reputation for buying back selectively, I suspect they will be in the market buying after falling 14% off of their April highs.
- KMI – I bought some a couple of weeks ago at $35.15. Since then its dropped to around $32/share. If it is at that level tomorrow, I will buy some. A 6.1% dividend is too tempting to pass up. I talked about why I liked KMI in an earlier post. Motley Fool weighs in: http://www.fool.com/investing/general/2015/08/09/3-reasons-investors-should-ignore-the-oil-crash-an.aspx?source=eogyholnk0000001
- COP/CVX and perhaps as a domestic spec EOG. Oil has to bottom here soon, I may buy some more if we see it get into the $30’s. This may be an area where I wait to see how the market shakes out over the next couple of months.
- Financials, I may add to my position in WFC. I might initiate something in either GS or JPM. If the fed raises interest rates, then the banks should benefit. In addition GS &/or JPM should benefit from additional volatility in the commodity, currency and stock markets.
What stocks/mutual funds are you buying?