Last week, Disneyâs stock ($DIS) fell ~10% after reporting second quarter earnings. This was despite the fact that the company partially beat its own expectations for the quarter and is on track to generate ~$8 billion in Free Cash Flow this year. Thatâs a lot of churros.
The reason investors drove the price down is because the CFO explained that things will get worse before they get better. Specifically, Disney is now projecting low financial expectations next quarter, with a return to growth and profitability by the end of the year.
I think this is short-term thinking, and here is why I like Disneyâs stock at todayâs price. Also note that I have a Disney-themed tattoo and my name engraved between the two theme parks in CaliforniaâŚso Iâm a little bit biased.
- Disney holds a portfolio of best-in-class media and entertainment assets that provide long-term opportunities to make more money
- The company has made significant strides in scaling itâs subscription streaming services (Disney+) in a thoughtful way
- The business is well managed from a financial perspective, with a focus on cash flow, profitability, and sustained long-term growth
With that said, Disneyâs stock price has had a history of stagnating for extended periods before rewarding investors that held long-term. For example, if you invested in April of 2000, you would have had to wait until March of 2012 just to break even. So I would only consider adding to your portfolio if youâre willing to exercise some patience.
đ Another Year of the Bull
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Despite many predictions of a recession and market correction over the last two years, the stock market continues to march up and to the right. The S&P 500 has risen 10.2% YTD, and 26.4% over the past year. Where do we go from here?
I personally donât see a ton of upside for the overall market from here. At the same time, I know markets are impossible to predict. Which is why Iâm leaving all of my equity investments as is, BUTâŚall of my new brokerage investments are going into bonds.
After all, the market returns 7-10% per year on average over the long run, and weâve already hit that mark. Meanwhile, you can get an almost guaranteed 5% returns in a treasury ETF like $BOXX. Iâd rather take the guaranteed 5% return over the uncertain 7% return any day.
Favorite Asset Classes YTD
My favorite asset classes right now are bonds and real estate. I already talked about bonds above, and now you might be thinking âreal estate??? in this market???â Absolutely.
First off, my analysis shows that there is no negative relationship between interest rates and real estate returns. In fact, itâs the opposite. Real estate does well when interest rates rise, and vice versa. If anything, real estate performance is a leading indicator of interest rates, not the other way around. Donât @ me unless youâve also run the numbers.
Secondly, investing in individual real estate means you have a lot more control over the deal you structure. It takes more work than buying a stock, but you can negotiate the price and structure the deal based on the return youâre looking for and the risk youâre willing to take. Good deals donât come easy, but theyâre worth the effort.
Iâve seen this myself as Iâve scaled up to three rental properties in my portfolio over the last three years, and Iâll be writing and posting more about real estate in the very near future. If youâre interested in learning more about real estate investing, want to invest alongside me, or just looking to watch the ups and downs of my journey like a reality show, then keep an eye out for future newsletters, or follow me on socials.
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Stuff Iâm Reading
đĄ How to Buy Your First Investment Property in 2024 (Brian Dean)
â°ď¸ Jim Simons, billionaire quantitative investing pioneer who generated eye-popping returns, dies at 86 (CNBC)
𼴠This Stock-Market Rally Isnât What It Seems (WSJ)
â˘ď¸ Americaâs reckless borrowing is a danger to its economyâand the worldâs (The Economist)
đ Apple Will Revamp Siri to Catch Up to Its Chatbot Competitors (NYT)
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