My luck is so bad, If I bought a cemetery people would stop dying. – Anonymous.
I must be one of the unlucky investors in the world! On 5th April 2019, I sold my Disney holding at $114.65 per share and within a week Disney stock rocketed to $132.41 per share. I certainly felt terrible. Also, I was surprised by the wonder of the stock market. I lost an opportunity to make thousands of dollar had I waited just a week. Well, why did I closed my position with Disney?
I am a big fan of Disney as a company. Even though I was not fortunate enough/gotten the opportunity to visit its park until now. I always adored its cartoon characters and brand image. In late 2017, I was informed of its sports and other channels, like ESPN, which I fondly enjoy watching NFL and other games. I also loved Disney movies.
My biased opinions about Disney was quite enough to get me started gambling on its stock. I saw nothing but a wonderful company just ready to dispense a whole lot of return! The more I think, the more beautiful the company looked. With no or very little research, I started my position in Disney company on 28th September 2016 at $91.98 per share (below). I bought more shares of it and my average bought price was around $94 per share.
Shortly after my position, all the luck was on my side and the stock price ballooned. After 7 short months, the stock was selling at around $17 per share. My excitement was sky-high. I felt the urge to sell. And sure did I. However, I sold some of it and kept some. Again, I felt lucky because the stock price started its journey towards my original buying price. This time my emotions were mixed. On the one hand, I felt the guilt of not selling all of it and on the other hand, I felt the excitement of almost perfectly timing the market (below).
The stock price did what it supposed to do. It went up and down. I slowly learned about Disney’s financials and its managers. This time, data helped me to support my opinions about the company. Disney surely is a great company with a long and time-tested business. Its financial were mostly flat for a few years and it’s stock price followed the suite (I think- see below). Disney is not a high flying growth company, but it is a durable and cash-rich business. It pays 1.5% in dividends.
I stood with Disney during all this time. There was no shortage of naysayers, who were sure to see Disney go south. However, I sighted with the optimists. The year 2017 was dominated by cord-cutting, which adversely affected Disney company. ESPN is a premier channel in the cable bundle, which yielded around $7 per subscribers to Disney. Media Networks is the biggest business segment by revenue. People, including me, were inclined to watch stuff online (preferably free) and unsubscribe cable, which helped us save quite an amount per month.
In 2018, the increase in revenue was due to an increase of 7% affiliate fees from higher contractual rates, which was partially offset by a decrease of 3% from subscribers. Disney has delivered quite a few super hit movies like Star Wars and Frozen and earned billions of dollars. Also, they sell quite a bit of Disney characters merchandises, which seems a sustainable business.
Robert A. Iger was appointed Chairman of the Board and Chief Executive Officer effective March 13, 2012. He was President and Chief Executive Officer from October 2, 2005, through that date.
On April 9th, 2019, Disney announced big news, which excited its investors and throttled its stock up 13%. Disney+ is set to launch in the U.S. market on November 12 at $6.99/Month. It is to offer new originals and unparalleled library offerings from Disney, Pixar, Star Wars, Marvel Studios, and National Geographic, as well as “The Simpsons” and 20th Century Fox Titles “The Sound of Music,” “The Princess Bride,” and “Malcolm in the Middle”. This certainly is the big news. In the current evolving entertainment world, more and more people prefer online streaming services like Netflix and Amazon Videos.
The thing behind my brainless buying and selling is human emotion. I was in the right mind while selling my Disney holding, although the decision was pretty hard. My love for the company is still as great as it was in 2016. I was, however, obligated to make this trade. It was not my money! Yes, I did all this in margin loan and it was a trade of my choice (not a margin call though). Now, I am convinced to reduce my margin loan as the interest on the margin loan is going up and stocks are getting pretty expensive.
This brainless trade was a profitable venture for me. I made quite a return (I will let you figure out/guess the percentage gain and comment it below). Although, I did not enjoy the emotional rollercoaster. Did I lose sleep over this? Not a second; although, I wish I had waited a week before selling it. I can not time the market. No one can! I was lucky on the first two transactions and a bit unlucky on the third time. The silver lining to all this is that I was trading with someone else money. And, the 2% dividends and low margin rate alleviated my journey.
A quick side note to my excellent readers – all along, I believed and computed Disney as quite expensive but a great business. Currently, it is offered at $238 billion while making a profit of $12.6 billion last year ($1.2 billion was a tax effect due to Tax reform). Yes, it is exciting to see a new line of services as an investor. But this streaming service will annihilate its cable service. People will not have both services. It is either the cable or the streaming service.
Disclaimer: No position.