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Walt Disney: Lessons Of Value Investing

William Bias profile picture
William Bias


  • Value investing is easier said than done.
  • Holding shares is easy when you can afford it.
  • Fear of job loss can lead to lost investment opportunities.

Value investing, while a profitable approach, can prove difficult to execute. Simply put, life interrupts.

I purchased my first shares of entertainment conglomerate Walt Disney (NYSE: NYSE:DIS) over eight years ago, in November 2007. I purchased more shares in subsequent years, and behaving like a good business-oriented investor with a long-term outlook, I never sold a single share. Moreover, I reinvested all of my dividends. However, during that time, I missed out on a monumental value opportunity in March 2009. This represented a rare opportunity for the purchase of a premier publicly traded business at roughly 50% below its normal trading range.

What's the worst part about missing this opportunity? I knew that it was a rare opportunity when it happened. However, one thing got in the way of me pushing the buy trigger at the opportune time. My hesitation enhanced my awareness of the difficulties in actually executing on value investing. Some of you are probably keenly aware of the issues I am about to discuss.

Fear of job loss

From the time I bought my first shares in 2007 until 2012, Walt Disney hovered around $30 a share, give or take a few dollars. However, fear stemming from the financial crisis caused the entire stock market to drop significantly during the final months of 2007 and throughout 2008, finally reaching a bottom around February 2009. According to Yahoo! Finance, the S&P 500 went from a high of 1,549.38 on October 1, 2007 to a low of 735.09 on February 1, 2009, representing an incredible 53% decline. Walt Disney dropped roughly 40% from its usual trading range of around $30 to about $18 a share in March of 2009.

DIS Chart

In spite of this dream scenario for the value investor, I hesitated to buy more shares, although not for the reasons you

This article was written by

William Bias profile picture
I have been analyzing stocks since 1992 and a freelance writer since 2012.

Analyst’s Disclosure: I am/we are long DIS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (54)

GARFREA profile picture
Woulda, Coulda Shoulda.......Blah Blah Blah
This quandary can be asked of any investment style (growth, div, etc). Investment in equities is but a part of the whole. The key is balance and risk. In 2008 the risk to your livelihood was very high relative to the low risk of investing in the price of DIS at that time. Let's look at the other scenario: suppose you invested at that time and then found yourself in the job market for an extended period of time, perhaps in need of cash. What would you have done? Sell DIS, maybe at loss at $5/shr. Wouldn't that have destroyed your confidence in the investing? Never regret a profit (236%)
William Bias profile picture
Hi steve quon,

Yeah being forced to sell at a loss was a concern of mine at the time. I was taught at an early age by my grandfather not to risk assets you may need during tough times.

Thanks for reading,

Economics-Based Investor profile picture
William, solid article and I would agree on the cash is king. Wife convinced me to buy BAC under $5 during those times. Should have bought a lot more, as well as SBUX under $8. Good to see you back on the publishing desk!
William Bias profile picture
Thanks Economics-Based Investor!
liusing profile picture
Fear is fear, if 2007-8 happen again, and DIS at below $20, don't think I have the mind to get in anyway, there would be news about the end of the world, and holding cash is the right thing to do. IMO.

However, if it gets back to $40 from $20, I should remind myself that it is still cheap, despite it doubled from bottom.
William Bias profile picture
Hi liusing,

I think I understand.

marilyncochoit profile picture
AAPL is a that point now---? Remember, long term is years away.
Grenadier profile picture
I feel for you, I really do. I lost my job in May 2008 as the cuts had started before Lehman really crashed in the industry I worked in. On August 12, 2008 as a newbie investor I bought a few ETFs with my investable cash on hand at that time leaving enough cash to live on while i looked for a job. The markets were already down quite a bit from 2007 so I figured it was time to invest.

Then a month later it would get much worse!! I never sold like you but I never bought either. I did not know how bad it was going to get for one and for another I did not really have the cash. I remember when Citibank was a penny stock and I was going to buy at 5 cents a share. I was sure that government would bail them out. I never did buy it though because I did not want to use up my savings and with the world failing apart and so many of my friends losing their jobs every penny I had might be needed. Plus what would happen if that bail out never came? I remember thinking that as well.
William Bias profile picture
Hi Grenadier,

Yeah at the time you just don't know.

Thanks for reading William
Grenadier profile picture
Yeah you just never now.

Great article and thanks for writing.
Great article...Could Apple buy Disney? It could, but would it? Imagine the content for iTunes and Apple TV?
I think it should $175/share would do it.
William Bias profile picture
Hi domtex1

That's an interesting question. It wouldn't surprise me if it happened. Personally I much rather keep the shares in perpetuity than accept a buyout offer of $175 per share.

Thanks for reading,

Project Starshot profile picture
It all seems to boil down to having bull markets. Anyone, even a monkey, who got in the markets (long) in 2011 or so would have well up to now - it has nothing to do with your investing prowess or investing research. I see a lot of hotshot managers promoting themselves on a 2011-2014 "Track Record" when the market grew just about as much - I don't see any evidence of skill here. I would respect someone who did 20% in 2015 and is up perhaps 10% so far this year - but sadly, you don't find many of these managers at all. There's no such thing as true outperformance - well there is, but those who actually are able to do it all the time don't come forth to say so - b/c they rely on insider trading.
You have high expectations. I ended last year up 13%, and I'm only up 7% YTD. And this was due to my shifting to bonds and preferred stock for new money.
DivyDo profile picture
To me this is a story of wise decisions as much as missed opportunity. Keeping a safety net for yourself is a prudent thing. You stayed the course through the downturn. To me that is more commendable than any shame in failing to double down. Thanks for sharing.
William Bias profile picture
Hi DivyDo,

Thanks for your readership and kind words.

"Value investing is like paying for sex. And it's actually kinda cool. You can negotiate practically anything and sometimes, even just kind of do stuff in the moment that you never agreed to pay for and it goes by without much argument." -Kenny Powers
Investment Pancake profile picture
Fantastic article. It is a practical, honest story that highlights the distinction between what works on paper verses how the real world operates and limits investment choices.

I'd say there are two models for value investing. The first, more common model is to behave like a hunter, holding enough ammo at the ready that when a big, juicy target walks by, you're ready to bag it at a stunningly good price. This is very hard to do - as the author points out, real life limitations can make it very difficult to pull that trigger even when you have all the ammo on hand that you think you might need.

The second model for value investing is to behave like a hammer, relentlessly pounding down the nails one after the other, over and and over, each month, each year, on and on. This is the approach I use. Every month, I invest at least SOMETHING into shares of the best companies I can find at the time, at the best prices then available. And when I invest, I routinely invest ALL cash I have on hand that I won't need for personal expenses. I blow all my dry powder without much care because I know that when next month comes, I'll have more dividends to reinvest, and I'll be right back in the market again buying shares of the best companies I can find at the best prices then available.

A word on prices. Some months, I am guaranteed to pay too much for my shares, other months, I am certain to get bargains. I don't even worry if I overpay for stock this month - the reason why is because I know that one day the market will crash, and when it does, I will be there each month to buy more shares and take advantage of the lower prices.

Overall, the hammer model of value investing is a bit less complicated than the hunter model. The key to making it work is knowing you are a hammer, and being committed to remaining thus for the foreseen future.
William Bias profile picture
Hi Investment Pancake,

Interesting analogy on dollar cost averaging.

Thanks for reading,

William Bias profile picture
Hi nodivnobuy,

Interesting points. Thanks for your readership.

Good article. I like to have enough cash and bonds where I'm ambivalent on the direction of stock market. If I'm cheering a market fall, then I must be too cash heavy. If I'm cheering the market rise, it means I'm cash light. I want to have equanimity either way. 60/40 seems to be close to my zone. Balanced funds can help here if don't like doing it yourself.
William, enjoyed reading your article, Disney is a quality company.
They have raised their dividend the last couple years very generously. Do you see this continuing?
William Bias profile picture
Hi mok31,

I don't know about generously, but I do see future dividends for the forseeable future.

GDPPP profile picture
It's difficult to get a read on SPY direction currently. I have a large position in DIS as part of my retirement acct with avg cost basis of 105. I didn't buy more when DIS went in mid 80s this past Feb, partly because of fear of it going down even further. Now that it is getting closer to my cost basis, I am thinking to sell half now and buy half later if SPY continues with its downward direction. ESPN and cord cutting maybe overblown, but still DIS relies heavily on ESPN for its bottom line (EPS) growth IMO. Also with Staggs departing, I am a bit unsure how this is going to unfold long term. So couple unknowns for me currently. Would appreciate author's thoughts on my comments. Thanks - Guru.
William Bias profile picture
Hi Guruprasad Pai,

First of all, thanks for your readership. Second, I am not a financial advisor so I can't comment on personal situations. However, personally I am a buyer and holder when it comes to Walt Disney and will take advantage when I can as indicated by my article. As for the management turnover, I think Walt Disney has a couple of years to sort that out. I don't Iger is supposed to leave until 2018.

Very appreciative of your article, as well. Glad you made it through the rough patch, and weren't forced to sell! As I review DIS numbers through Valueline, it seems the best chances for my required return would depend on their buyback policy. At these prices, I'll only keep an eye out for a good entry point.
For Disney I like to buy when I can get it for a multiple less than Comcast and Time Warner. I think DIS has better IP and better execution than those companies, so when it trades cheaper than them, I feel it's a good opportunity.

I also like DIS at a yield higher than the 10 year treasury.

Those are my two entry points now that the S&P is trading at 24x earnings.
Thanks, RM. Ideas worth considering! As for Mr. Staggs's departure, mentioned below, I say, "Be optimistic." The opportunity and challenges are great, and the talent pool may be deep.
William Bias profile picture
Hi Berto Bevel'aqua,

Thanks for your readership. Walt Disney is definitely worth watching.

What's your definition of value investing? I see this term tossed around with various definitions.

As for your lack of investing during a downturn, I think you might have underestimated your required cash on hand needed for emergency. A recent article in the Atlantic points out the poor shape America is in regardless of income level, so don't feel bad about it.

However, now that the markets are expensive, this is a good time to true up your cash account.
William Bias profile picture
Hi RamblingMad,

Yeah when the markets are going up like crazy I tend to pile on more cash.

Thanks for reading,

Kobalt Research profile picture
What definitions do you see? Seems most would have to boil down to buying when market price is (significantly) below (real, intrinsic, true) value.
How do you calculate intrinsic value? This is also one of those words tossed around with a bunch of different definitions.
Clauser1960 profile picture
It is the same for the money I invested in the SP500 on February 2008 and during other bottoms. But not enough, because it is difficult to invest when FEAR is all around you, as in DIS and thousand other stocks. Just 3 months ago, Amzn was at 520. Today is at 670.
Wapiti19 profile picture
Challenge is when is the low. When at 50, then goes to 30, think u got a great deal, then goes to 20. Years 2007 - 2009 is long time to be patient . If am age 25, then value is on your side , if age 75, then need to have a legacy strategy.
Oh to be back to the future.
William Bias profile picture
Hi Wapiti19,

Yeah at the time I thought the opportunity would last longer or even get better. But it didn't. Thanks for reading.

Matt Sabre profile picture
That challenge is made pretty easy with fast graphs
William Bias profile picture
I would like to take a closer look at Fast Graphs.
somedata1 profile picture
I bought some DIS shares below 100. Will buy a lot more if it's 40% off the high of 122.
William Bias profile picture
Hi somedata1,

I bought some a couple of months ago when it was trading in the mid $90s. It's a good company. Thanks for reading.

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