Wednesday, July 6, 2022
HomeValue InvestingThe Walt Disney Company - Position Update | Value Investing

The Walt Disney Company – Position Update | Value Investing


The Walt Disney Company

“To infinity and beyond” – Buzz Lightyear (A Toy Story)

A Toy Story is considered Disney’s most successful animated movie series. In total, gross sales have exceeded $3 Billion. This is just another example of The Walt Disney Company’s ability to generate revenues and ultimately profits. Disney is a DOW Jones Industrial Average member, which means it is one of the top 30 publicly traded companies. Anytime an investor can buy this company at a low price, it will reward patience. This site’s Value Investment Fund took advantage of the recent market decline along with the entertainment industry’s setbacks and now owns three separate tranches of The Walt Disney Company.

On Friday May 6th, the Fund purchased 180.1801 shares for a total investment of $20,000. The price hit $110 per share which met the primary requirements the Fund set for this particular company. Intrinsic value is $116 per share with a ‘Buy’ set at a 5% discount to intrinsic value. 

On May 9th, the Fund sold PUTs on The Walt Disney Company to force the Fund to purchase the stock at $105 per share plus a $1 per share transaction fee. The Fund sold 200 options. On May 12th in the early morning, the price per share dropped to less than $100 and the Fund was forced to comply with the terms of the option. The Fund paid $21,200 including the $1 per share transaction fee to own 200 shares.

In addition to complying with the terms of the PUTs and as noted in the post about the sale of PUTs on The Walt Disney Company, the Fund purchased a third tranche at $100 per share on May 12th.

Altogether, the Fund invested $61,200 and owns 578.1999 shares of The Walt Disney Company at an average cost of $105.85 per share including transaction fees. The sale of the PUTs realized $1,760.

This Fund’s facilitator has analyzed Disney and based on its stable history, growth in subscribers and overall management firmly believes that the company’s stock price will hit $160 per share within two years. If exercised at $160 per share and adjusted for transaction fees, the Fund will net $53 per share on a $106 per share cost basis. This equates to an absolute return of 50%. Annualized, it will equal 22% per year. If market price recovery is successful in less than 1.5 years, the annualized return will exceed 30% per year. Now it is just a matter of waiting. Act on Knowledge.

© 2022, David J Hoare MSA. All rights reserved.

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