Why Disney's Still Worth Buying

One of the great maxims of traders and Wall Street pros is to follow the "smart money."

I'm not much for the thesis that institutional shoppers tend to make smarter investing decisions, but many of you who've read my ruminations on insider buying say you'd also like to know how the Big Money is betting. Your wish is my command.

Next up: Walt Disney (NYSE: DIS  ) . Are institutions bullish or bearish when it comes to the House of Mouse?

Foolish facts

Metric

Walt Disney

CAPS stars (out of 5) ****
Total ratings 4,673
Percent bulls 92.9%
Percent bears 7.1%
Bullish pitches 707 out of 771
Highest rated peers Madison Square Garden, DreamWorks Animation (NYSE: DWA  ) , Ballantyne Strong

Data current as of March 7.

No brand is more closely associated with children's entertainment that Walt Disney. I should know; my three kids take daily tours of the Disney Channel. They're most often seeking Wizards of Waverly Place or Good Luck, Charlie, but our kindergartner still enjoys the Toy Story movies and Phineas and Ferb as well. The House of Mouse has us trapped.

And we're not the only ones. According to the latest survey from License Global magazine, Disney Consumer Products is the world's top licensor with $27.2 billion in retail sales generated from its imprints. To understand how impressive that is, consider that second-place Iconix Brand Group (Nasdaq: ICON  ) nets $9 billion.

Nobody does a better job of monetizing fantasy. But don't take my word for it. Just look at Disney's top 10 movie hits compared to rival studio DreamWorks:

Disney

Film

Domestic Gross*

Release Date

Pirates of the Caribbean: Dead Man's Chest $423.3 July 7, 2006
Toy Story 3 $415.0 June 18, 2010
Finding Nemo $339.7 May 30, 2003
Alice in Wonderland (2010 remake) $334.2 March 5, 2010
The Lion King $312.9 June 15, 1994
Pirates of the Caribbean: At World's End $309.4 May 25, 2007
Pirates of the Caribbean: Curse of the Black Pearl $305.4 July 9, 2003
The Sixth Sense $293.5 Aug. 6, 1999
Up $293.0 May 29, 2009
The Chronicles of Narnia: The Lion, the Witch and the Wardrobe $291.7 Dec. 9, 2005
TOTAL $3,318.1  

Source: Box Office Mojo
*In millions.

DreamWorks

Film

Domestic Gross*

Release Date

Shrek 2 $441.2 May 19, 2004
Shrek the Third $322.7 May 18, 2007
Shrek $267.7 May 16, 2001
Shrek Forever After $238.7 May 21, 2010
How to Train Your Dragon $217.6 March 26, 2010
Kung Fu Panda $215.4 June 6, 2008
Monsters Vs. Aliens $198.4 March 27, 2009
Madagascar $193.6 May 27, 2005
Madagascar: Escape 2 Africa $180.0 Nov. 7, 2008
Shark Tale $160.9 Oct. 1, 2004
TOTAL $2,436.2  

Source: Box Office Mojo.
*In millions.

Disney has collected almost $900 million more in domestic gross box office receipts than its closest peer. To be fair, Disney's side of the ledger includes a mix of live action and animated features. And yet the point remains: the House of Mouse has a long history of generating big gates from big features, and then incorporating theatric successes into its other franchises -- from the tube to theme parks. Fools like the long tail.

"New films, Pixar, Disney channel, cross-marketing. There are so many channels for growth here that the future looks very bright. The management team is now top-notch and taking care of the business. Don't doubt the Mouse," wrote Foolish investor mwlove last month.

Institutional ownership history

Top Owners

2008*

2009*

2010*

Latest*

Fidelity Investments

93,617,031

101,397,416

96,523,481

96,523,481

BlackRock

13,787,713

89,762,920

89,542,407

89,542,407

State Street Global Advisors

73,780,326

70,199,999

72,921,696

72,921,696

The Vanguard Group

56,977,637

61,851,618

66,284,226

66,284,226

T. Rowe Price Group

14,907,966

36,331,746

43,146,094

43,146,094

TOP 25 TOTAL

599,861,610

727,375,039

789,216,064

789,216,064

Source: Capital IQ, a division of Standard & Poor's.
* Indicates the number of shares owned.

Most institutional investors have taken that advice to heart. As a group, the top 25 have been buying steadily since 2008. On a quarterly basis, they briefly took some profits in the September quarter -- thanks largely to a sizeable sale made by JPMorgan Chase's asset management unit -- but then piled back into the stock in Q4.

More recent buyers include the highly regarded Fidelity Capital & Income (FAGIX) fund, which yields an astonishing 6.23% as of this writing. Morningstar says that manager Mark Notkin purchased 1.38 million shares of Disney last fall. The stock is up more than 17% since, outperforming the S&P 500 by seven percentage points.

Competitor and peer checkup

Company

Institutional Ownership

Insider Ownership

DreamWorks Animation 70.95% 21.30%
News Corp. (Nasdaq: NWS  ) 63.15% 13.18%
Time Warner (NYSE: TWX  ) 84.25% 0.07%
Walt Disney 67.39% 7.36%

Source: Capital IQ. Data current as of March 7.

Interestingly, the rally hasn't pushed Big Money buyers to snap up all that remains of Disney shares. Indeed, compared to peers, the House of Mouse offers an attractive amount of institutional headroom. Insiders also own a healthy slice of the business, led by board member and former Pixar co-founder Steve Jobs.

But good as it is, the company's ownership profile doesn't keep me in Disney's stock. I've kept the shares assigned to me after the Marvel acquisition because I believe Disney will reap more from Marvel's properties that the comic book king ever would have on its own. Exceptional fourth-quarter results suggest I'm right.

Do you agree? Disagree? Let me know how you'd rate Walt Disney using the comments box below. You can also recommend other stocks for me to evaluate by sending me an email, or replying to me on Twitter.

And in the meantime, keep tabs on The House of Mouse by adding the stock to the My Watchlist tool, our free, personalized stock tracking service.

Walt Disney and DreamWorks Animation are Motley Fool Stock Advisor selections. BlackRock is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Disney at the time of publication and is looking forward to supporting the company with theater visits for this summer's Thor and Captain America: The First Avenger. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. You can also get his insights delivered directly to your RSS reader. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool owns shares of JPMorgan Chase and T. Rowe Price and is also on Twitter as @TheMotleyFool. Its disclosure policy is smarter than the average bear.


Read/Post Comments (2) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 07, 2011, at 4:32 PM, dadb2 wrote:

    "It's all about the Mouse" This was a favorite saying that my family had when we visited Disney World and I still think it holds true for the stock.

  • Report this Comment On March 07, 2011, at 9:16 PM, AntiochAndy wrote:

    Big money buyers will never "snap up" all that remain of Disney shares. There are too many of us out here who own the stock for other than financial reasons. I bought my DIS shares years ago not as an investment, but because I wanted to own a little piece of DIS. I will not sell at any price that's realistically ever likely to be offered. And I'm not alone. In fact, I read once that a lot of people bought a few shares, or even one, just to get the certificate.

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