You never forget your first blue chip. Living a short drive from Walt Disney World since I was five, I grew up passionate about all things Disney (NYSE:DIS). From its awe-inspiring theme parks to its pioneering ways in theatrical animation, Disney's past is as colorful as its celluloid creations. However, that would mean little if I wasn't convinced that Disney's future was similarly bright.
It starts at the top, where CEO Bob Iger has been able to shake off any doubts that he has what it takes to lift the family entertainment giant to the next level. Key executives bolted under Michael Eisner's watch, but Iger has been able to stem off the brain drain by keeping them involved in the decision-making process.
He may not have the same creative playground working in his noggin as Walter Elias Disney himself, but he seems to have Walt's gift for making everyone around him work smarter, through what can best be described as inspirational pollination.
Major traits in a Minnie stock
Disney has grown over the years. A lot of it is organic; quite a bit has come through acquisition, too. Sometimes the buyouts don't pan out immediately. In retrospect, Disney overpaid for Infoseek and the Fox Family Channel (now ABC Family). However, it got a bargain in the $19 billion deal for Capital Cities/ABC, and history will likely look back kindly on the $7.4 billion Pixar buyout it completed earlier this year.
Searching for the perfect blue chip? You may find yourself craving a golden brand, all-weather allure, and catalysts for future growth. You would be hard-pressed to find a company that can beat Disney on those three counts.
The Disney brand? Everyone associates Disney with quality family entertainment. You don't just open a theme park at the other end of the world -- as Disney did last year in China -- unless you've got global appeal. You don't rake in more than $2 billion a year in consumer-products revenue, mostly through passive royalties in merchandise licensing, if you aren't universally loved.
All-weather? Disney can be seen as a defensive stock. Yes, economic lulls may trip up the company's progress in selling ads on ABC and ESPN or filling up its theme parks, but Disney has a knack for holding up relatively well in all climates, because families tend to cut off entertainment for their children as a last resort in tight times.
Catalysts for future growth? Are you kidding me? With Pixar now under its umbrella, Disney is back on top in theatrical animation. Its theme parks are being revived, with new attractions in the works that star many of the Pixar characters. ABC is once more a contender, thanks to hit shows like Lost, Desperate Housewives, and Grey's Anatomy. Even the once-stagnant film studio has found a marketable franchise in the Pirates of the Caribbean series, which just happens to be the top box office draw of 2006, me hearties.
The pieces of the puzzle fit
Disney's theme parks, media networks, studio entertainment, and consumer-products division come together as perfect interlocking puzzle pieces. A hit animated film inspires merchandise sales and theme park promotions.
You can snap up stand-alone entities in Disney's areas of specialization. One can make a sound argument for owning DreamWorks Animation (NYSE:DWA) as a pure play in computer animation, or Cedar Fair (NYSE:FUN) as a way to live in a giddy, high-yield midway of amusement-park fun. However, Disney is still bigger than any of these companies in their fields, and the synergistic power of Disney's empire clicks together more easily -- and much more lucratively -- than a stand-alone player.
Sure, Viacom's (NYSE:VIA) got Nickelodeon, and Carnival's (NYSE:CCL) got the bigger fleet of cruise ships, but you don't need to have it all to make your investors as rich as Scrooge McDuck. (Well, almost as rich.)
I'm not alone. 90% of the 534 CAPS players also believe that shares of Disney will beat out the market in the future. If you agree with me -- or even if you don't -- now would be a good time to make sure you are heard by voicing your opinion on Disney. That will help us single out the best blue chip of 2007 come early next week, even if you know how I feel.
When Snow White's wicked witch asks her all-knowing mirror what the bluest chip of all is -- the answer is clearly Disney.
To read about the rest of our blue-chip candidates, click here.
Disney and DreamWorks Animation are recommendations in the Motley Fool Stock Advisor newsletter service. Cedar Fair is a high-yielding pick in the Income Investor newsletter service.
Longtime Fool contributor Rick Munarriz has been a Disney fan since childbirth, and one of his proudest possessions is a second home that is a five-minute drive from the Animal Kingdom parking lot in Kissimmee. He does own shares in Disney. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.
