There’s no question that Walt Disney (NYSE: DIS), with a market value recently topping $230 billion, commands an entertainment empire.
Disney’s theme parks attract millions of visitors every year. Its TV networks, including ABC, Disney Channel and ESPN, reach hundreds of millions of viewers. Seven of the top 10 largest-grossing movies of all time were made by studios now owned by Disney. And Disney has already made more money from its 2019 films than any other studio ever has in a single year – and it achieved that milestone in July.
Disney’s acquisition of Twenty-First Century Fox gives the company an even greater content portfolio. Although this megadeal negatively impacted Disney’s earnings in its latest quarter, it also enabled the company to deliver impressive year-over-year revenue growth of 33%.
Disney has proven exceptional at leveraging its portfolio of content, which includes power players such as Marvel, Lucasfilm, Pixar and the now-ubiquitous Disney Princesses. Its rollout of its Disney+ video streaming service in November will give it yet another way to make money.
Sure, Disney faces challenges. Its TV networks continue to experience the effects of cable subscribers cutting the cord. An economic recession could cause some customers to cut back on vacation spending, hurting its theme-park businesses. But the long run continues to look very bright for Disney. (The Motley Fool owns shares of and has recommended Disney.)
Ask the Fool
Q: What’s the difference between mergers and acquisitions? – H.W., online
A: In general, a merger is when two companies (often of roughly similar size) combine to form a new company, often with a new name and new shares of stock issued. Acquisitions, which happen far more frequently, are when one company takes control of another. While mergers are often friendly and a joint effort, acquisitions can be hostile.
Famous mergers include Exxon and Mobil (forming ExxonMobil), Citicorp and Travelers Group (forming Citigroup), AOL and Time Warner (forming AOL Time Warner), Royal Dutch Petroleum and Shell Transport & Trading (forming Royal Dutch Shell) and Sirius Satellite Radio and XM Satellite Radio (forming Sirius XM Holdings).
Examples of acquisitions include Microsoft buying LinkedIn, Amazon.com acquiring Whole Foods Market and CVS Health buying Aetna. Some acquisitions, such as when Disney bought Pixar or when Daimler-Benz bought Chrysler, are referred to as mergers, in large part to honor the acquired company and let it save face.
Q: I’m new to investing, have several thousand dollars and want to start buying stocks. How should I invest my money so that it’s safe and grows? – C.D., Keene, New Hampshire
A: You’d do well to take some time to read up on investing first. Some stocks are less risky than others, but none are risk-free. Consider investing your money in a certificate of deposit, or CD, for a few months or a year while you learn more.
A low-fee, broad-market index fund, such as one based on the S&P 500, is a good way to enter the stock market; for many people, that can be all they need. If you want to learn how to invest in individual stocks, keep reading, and visit us at Fool.com.
My dumbest investment
My dumbest investment was in the stock of Sears. I believed that Eddie Lampert could turn the ailing company around. Nope. – Dave, online
The Fool responds: Investors in Sears Holdings have had a tough ride. Sears, Roebuck & Co. merged with Kmart in 2005, forming Sears Holdings, and investors were generally optimistic for a while.
Investor Eddie Lampert, controlling a big chunk of Sears Holdings’ shares, has been at its helm for most of its life, during which both the Sears and Kmart chains have shrunk to become shells of their former selves. One criticism of Lampert is that he took much of the company’s income and used it to buy back stock. That essentially retires those shares and shrinks the company’s share count; in a best-case scenario, it would leave remaining shares more valuable. But in this case, he was buying stock back when it was overpriced, destroying value; that money might have been better spent trying to improve and strengthen the businesses.
Meanwhile, the country moved through a recession, and the retailers struggled. While Sears Holdings took in $53 billion in 2006 and posted a profit, it has been losing money for years and shuttering hundreds of stores; in 2017, it took in only $16.7 billion. Sears filed for bankruptcy protection in 2018.
It’s always risky to bet on a struggling company turning itself around, so consider just sticking with solid, profitable performers.
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