The Motley Fool dishes out Disney advice

The Motley Fool Take

Following a quadrupling of its share price since 2011, Walt Disney (NYSE: DIS) stock has recently tumbled, largely due to missing Wall Street’s expectations in its last quarter and warning that a drop in ESPN subscriptions will hurt its cable operations.

This presents an attractive buying opportunity for long-term investors.

Media networks, including ABC, are a big part of Disney’s business, accounting for 43 percent of total revenue in fiscal 2014 and 56 percent of operating profits. It also boasts highly lucrative theme parks and a host of cross-marketing opportunities among its various businesses.

Major acquisitions of Pixar, Marvel and Lucasfilm have dramatically broadened the available content for Disney to use, and excitement is building over new installments in the Star Wars realm as well as other established franchise themes. There’s a lot to look forward to, such as the upcoming premiere of “Star Wars: The Force Awakens,” which many expect will shatter box office records.

Disney’s theme parks are posting record attendance (134 million people worldwide last year) and have long-overdue upgrades and expansions in progress. For example, Star Wars-themed attractions are coming to Florida and California next year, and Shanghai Disneyland opens in China next year, too. Investors might yawn at Disney’s recent 1.3 percent dividend yield, but it’s growing, having tripled over the past five years.

Ask the Fool

Q: What’s the difference between a company’s outstanding shares and its “float”? — M.S., Woodworth, Wisconsin

A: “Shares outstanding” are all the shares a company has issued. Some may be held by insiders, with the rest owned by the public. Insider shares are usually held for a long time and traded infrequently, while shares in public hands trade more often.

The shares owned by the public represent the “float.” Imagine that One-Legged Chair Co. (ticker: WOOPS) has 100 million shares outstanding. If insiders own 40 percent of them, then its float is the remaining 60 percent, or 60 million shares. Beware of stocks with small floats (“thinly traded” stocks), as they can be extra-volatile. As supply is so limited, any kind of demand can send them soaring, and vice versa.

Q: Which brokerages charge the lowest commissions to buy or sell stock? — A.O., Venice, Florida

A: Many major brokerages charge $10 or less per trade. Look beyond just commissions, though. After all, if you buy or sell stocks only a few times a year, finding the lowest commission rate won’t save you all that much, while other brokerage features might be more valuable to you.

When shopping for a brokerage, consider its features and conveniences (such as local branches, a wide variety of mutual funds or check-writing services) and how well it meets your needs. Be sure to assess all fees, not just trading commissions, with any brokerage you’re considering. Some brokerages charge quarterly account activity fees just for having an account with them. These are often waived if you have a lot of money in your account.

My Dumbest Investment

One of my dumbest investments was a medical company that I selected and invested in on my own. It had no debt and growth of 10 percent annually for six years.

I bought a bunch of shares averaging around $15 apiece, and then the stock rose to $31 per share. So far, so good.

But then I saw an article that said the company had been indicted by the Department of Justice. The shares started falling, and I sold most of my shares - at a profit, fortunately - when they were in the low $20s. Now the stock is back up in the low $30s. I’m still kicking myself. But really - it’s good to take these bad-news articles seriously and better to be safe than sorry. - C.L., Portland, Oregon

The Fool responds: It’s easy to kick yourself, but when you sold your shares, you didn’t know what would happen - and it is indeed smart to take an indictment seriously.

Some bankruptcies start with indictments, after all. You did hedge your bet a little by not selling all your shares, so you can still profit from the stock’s continued growth. And you were also smart to seek a company with little to no debt and a solid track record of growth.

Ideally, you were also confident in its future growth potential and competitive advantages. You should always be invested in your best ideas, and an indicted company can fall short.