Why I’m Never Selling Walt Disney Stock

The concept of buying a stock and holding it forever is usually easier said than done. Market crashes often lead to panic-induced sales, or investors might cash out of a steady stock to chase the performance of a hot momentum stock.

At The Motley Fool, we encourage investors to invest with long-term goals in mind. Therefore, I'd like to share with you one stock that I'd never sell -- The Walt Disney Company (DIS -2.12%)

(DIS -2.12%)Strong fundamentals
When I look for a "buy and hold forever" stock, I look for four basic qualities -- long-term price growth , robust top and bottom line growth, rising operating cash flow, and decent operating margins. Disney passes all four tests with flying colors:

Source: Ycharts.

Let's check how Disney measures up against industry rivals Time Warner (TWX) and Fox (FOX) in terms of stock valuation and recent earnings growth:

Source: Yahoo Finance, Oct. 30.

Although Disney trades at a premium compared to both companies, higher multiples can be expected if investors expect higher top and bottom line growth in the future.

Aggressive franchise growth
Disney's core strength is that it knows how to nurture its franchises and expand them to as many business divisions as possible. Two recent examples are Marvel and Frozen.

Source: Marvel.

After acquiring Marvel Entertainment five years ago, Disney continued Marvel's development of the Marvel Cinematic Universe, which would tie all of its film franchises into a single universe. Starting with The Avengers in 2012, Disney started booking full revenues from its Marvel films. The five films since then have grossed more than $4.7 billion worldwide over the past two years. Disney then expanded that universe to television with Marvel's Agents of SHIELD and the upcoming Agent Carter on ABC, as well as five new shows on Netflix. Looking ahead, Marvel already has 11 more films in the pipeline going all the way to 2019.

By comparison, Time Warner only recently started developing a combined film universe for its DC characters with Man of Steel and the upcoming Batman v. Superman: Dawn of Justice. However, the film and TV versions of the DC universe (seen on The CW, a joint venture with CBS), remain separate, eliminating the chance for bold film crossovers and promotions.

With Frozen, its hit animated film which grossed $1.27 billion worldwide on a budget of $150 million, Disney got a best-selling soundtrack which stayed at the top of the Billboard 200 for 13 consecutive weeks, the second best-selling Blu-Ray in history, and licensed toys and accessories which could generate sales of $1 billion this holiday season. But that wasn't enough for Disney -- it also introduced the Frozen characters to ABC's Once Upon a Time, added new Frozen-themed attractions to its theme parks, signed a deal with Random House to launch a series of tie-in books, and announced an upcoming mini-sequel for the film on ABC.

To top that off, Disney also added its Marvel and Frozen characters to its Infinity interactive toy line, which will definitely boost sales at its Interactive Division this holiday season.

Source: Disney.

A bulletproof long-term pipeline
If investors are uncertain what a company will look like in a decade, it's probably not a sound long-term investment. Disney, on the other hand, offers investors a clear vision of its plans for the next decade.

In the Studio Entertainment division, which accounted for 14% of its top line last quarter, we can look forward to more Marvel films, the arrival of Star Wars: Episode VII at the end of next year, new Pixar films, and the possibility of more animated hits like Frozen.

Those properties will inevitably cast a halo effect over the Media Networks division, which accounts for 44% of Disney's top line, with crossover TV shows and specials. The Interactive Division will be lifted as Infinity's virtual toy box becomes the digital sandbox equivalent of Disney's media universe, while the Consumer Products segment will benefit from more licensing deals with toy makers. Disney's flagship theme parks, which bring in 32% of its revenue, should also receive a nice boost in late 2015 and throughout 2016 when Shanghai Disney Resort opens.

The magical road ahead
With a clear roadmap for the future, a portfolio of top franchises, and the ability to effortlessly expand them across multiple business segments for maximum profitability, I definitely think Disney is one stock that can be bought and held "forever."