Please ensure Javascript is enabled for purposes of website accessibility

Mickey Mouse Robs Spidey

By Tim Beyers – Updated Apr 6, 2017 at 1:07AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Disney couldn't be getting a better deal.

I'm going to make a lot of money today. While I should be happy, I just don't feel like celebrating.

Marvel Entertainment (NYSE:MVL), by far my largest holding, and now a 14-bagger for David Gardner's side of the Motley Fool Stock Advisor scorecard, is about to retire. Disney (NYSE:DIS) is buying the comic book king for $4 billion in cash and stock.

Oh, what a steal this deal is.

Those who've followed my Marvel coverage for a while know that I love its industry-leading returns on capital, massive free cash flows, and rich partnership deals with the likes of Sony (NYSE:SNE), Hasbro (NYSE:HAS), and News Corp.'s (NYSE:NWS) Fox Studios.

Foolish colleague Rick Munarriz and I recently dueled over which of these two stocks is more enticing. My take was, and still is, that Marvel's massive licensing machine -- the fourth largest in the world, according to License Global magazine -- has room to grow at half of Disney's royalty rate. That's why this deal makes so much sense. With Marvel, Disney is buying no-brainer licensing growth.

And it's doing so on the cheap. Disney gets Marvel for just north of 20 times earnings. That sounds expensive, I know. Here's why it isn't: Long before Iron Man was a box-office blockbuster, Marvel was boosting operating income by 28% a year.

Yes, you read that right: 28% a year, without a contribution from Marvel Studios.

I'm going to make a lot of money today, and I'm happy about that. But as it so often happens with the very best businesses, this one is being taken out too soon, at too cheap a price.

What do you think about Disney's acquisition of Marvel? Who got the better deal? Let me know by leaving a comment below.

Marvel, Hasbro, and Disney are Stock Advisor selections. Disney is also an Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers had stock and options positions in Marvel at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of Hasbro and is also on Twitter as @TheMotleyFool. The Fool's disclosure policy hopes you make some big money today, too.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Walt Disney Company Stock Quote
The Walt Disney Company
$94.33 (-3.20%) $-3.12
Marvel Entertainment, LLC Stock Quote
Marvel Entertainment, LLC
Hasbro, Inc. Stock Quote
Hasbro, Inc.
$67.42 (-0.69%) $0.47
Sony Corporation Stock Quote
Sony Corporation
$64.05 (-1.57%) $-1.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.