Stock Market Investing: Why Disney is the “Happiest Place on Earth” for Investors
We are deep into the busy summer season for theme parks. Whether it’s The Walt Disney Company (NYSE/DIS), SeaWorld Entertainment, Inc. (NYSE/SEAS), Universal Studios, or Six Flags Entertainment Corporation (NYSE/SIX), it’s all about the entertainment value. The market is competitive for the dollar. So which park is tops for both visitors and stock market investing. I can honestly say Disney is the best of breed in this segment—hands down.
Disney: Dominating the Competition
I’ve been to all of the parks. And while Disney may not offer the best thrill rides, it does provide the best experience due to its assortment of shows, awesome characters, and great variety of rides for the masses. Not everyone wants to go on a mind-boggling, bone-shaking rollercoaster.
Disney markets itself as the “happiest place on earth.” And for investors; this has also been the case. The stock has easily outperformed the S&P 500 with a 41% advance over the past 52 weeks versus a 9.52% run in the index as of Friday.
Look at the chart below; it shows the dominance of Disney over SeaWorld and Six Flags from February onwards.
Chart courtesy of www.StockCharts.com
A Case Study in Sound Stock Market Investing Strategies
Disney not only owns theme parks in the U.S., Paris, Hong Kong, and soon-to-be launched Shanghai, but the company also owns TV network ABC and sports leader ESPN. This gives this entertainment stock more flexibility and diversity.
But, back to the all-important theme parks. The Disney characters are part of what make the theme parks a special place, especially for the younger crowd. (Although, I still love the characters even after all these years.) You simply don’t get the same feeling in the non-Disney theme parks. With this, of course, comes a massive global network of merchandise sales and big-screen movies that tend to be ageless for generations to come.
A great move by Disney was its acquisition of Marvel and all of its 4,000 or so characters, which I feel was a strategic move by the company; especially regarding the movie side of the business. Already we have seen several blockbuster super hero movies from Disney including the current Ant-Man. The addition of Marvel helped to bolster Disney’s massive movie segment.
What Disney is getting really excited about is the highly anticipated opening of Disney Shanghai in the spring of 2016. Disney will own 43% of the venture, but 70% of the management team will be running the park, which will give it control over the location’s direction.
Having been to Disney Hong Kong, I must admit I was somewhat disappointed by the much smaller size and far fewer attractions. Of course, when building in Hong Kong, land is always a problem. What Disney Shanghai offers will be a much bigger park along with a more complete experience for the visitor. I think it’s going to be a massive success for Disney because there are roughly 27 million people living in Shanghai, with another 50 million or so within three hours travel. Hence, the target market is enormous.
For Disney, the move into China will open up the vault to 1.3 billion potential customers and a massive middle class of over 300 million who want to experience American theme parks. While the majority will likely never have the chance to go to Disney in HK or Shanghai, the exposure in China will allow Disney to market its merchandise and movies to the masses. Of course, there will be the growing problem of intellectual property and the massive market for knock-offs in China; one that Disney will surely try to deal with.
In my view, it’s a win-win situation. Before you know it, the great metropolis of Shanghai will have one of the happiest places in the world. I can’t wait to go.
