There are three ways investors can mitigate risk:
- Extend your time horizon.
- Require a sustainable competitive advantage.
- Buy at a good price.
In the short run, the stock market is unpredictable, turning every investment idea into a gamble. But over the long haul, price eventually follows value. In other words, there is less guesswork involved for investors with a time horizon of over three years than there is for investors looking to make a quick buck. But when making such a long-term commitment, investors need to pick companies with an economic moat. An even safer move is to buy these companies at reasonable prices.
This company is far more than a trash hauler. It's the largest disposal business in North America. Its network of waste transfer stations, landfills, and recycling facilities is second to none. And fortunately for Waste Management investors, strict government regulation makes landfill expansion nearly impossible. So shareholders need not worry about competitors suddenly gaining momentum on Waste Management. As the largest player in the industry, the company simply gobbles up other companies when it sees opportunity, just like it did in 2012 with the acquisition of Greenstar to secure more volume in recycling.
Simply put, Waste Management isn't going anywhere. And as an excellent dividend stock with a substantial dividend yield of 3.7%, Waste Management is definitely a reasonably priced investment idea.
ESPN, accounting for approximately 65% of Disney's operating income, is as healthy as ever. College and pro football are both arguably cornerstones of sports programming in the U.S., and ESPN continues to hold dominant positions in both. And the rest of Disney's business is firing on all cylinders. Disney's parks and resorts segment continues to impress, with revenue up a nice 14% in the company's most recent quarter. Furthermore, Disney's joint venture in China for its Shanghai Disney theme park, slated to open in 2016, could present significant upside to the segment if it plays out well. Then, of course, there are the powerhouse franchises under its studio entertainment division, including Pixar, Marvel, Lucasfilm, and Disney studios itself, playing a leading role in the live-action and animated segments of the film industry. Talk about well diversified: Disney is a powerhouse full of valuable assets.
Based on a conservative discounted cash flow valuation, Disney currently trades at a 9% margin of safety -- not bad for a business that will clearly be around for decades.
Worth a deeper look
If you're looking for low-risk investment ideas that are built to stand the test of time, Waste Management and Walt Disney are worth your consideration.
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