Whenever I go on a trip it typically turns into a research or fact-finding adventure for me. Recently my family of six headed south to Disney World in Florida. I have personally owned Disney stock for nearly ten years and had been to Disney World twice, once as a child and another as an adult in my late 20’s. While I planned to try and enjoy the sights and sounds, I also wanted to observe how part of the Disney machine (its theme park operations) runs.
Here are some of my observations on both a personal and professional level:
- Chasing after 4 kids 5 and under is not a vacation. While I love my children, there was likely zero chance that they were all going to be happy at the same time, even at Disney World.
- To that point, there is no end to what a parent will do or spend on happiness for a child. With kids throwing tantrums at the most magical place on earth, candy, food, and toys are some of the plentiful options there to help soothe your children. And once your child sees some other child with something that they remotely want, it’s game over for the parents. Just bust out the credit card or in Disney’s case the wrist band.
- You can see the technological advances all around Disney and I am not just referring to the amazing rides and scenery. You literally have this Disney armband that is your gateway to everything from getting into parks, your room, and ideally spending your money on the food and souvenirs. They are likely tracking your every move similar to a Fitbit. My wife and I even talked to security personnel (told you this was also a fact-finding trip) that told us that they have used these bands to track down lost children because of where the child last swiped their wrist band.
- These armbands are likely capturing a treasure chest of data on you that Disney will ultimately likely use to get you to spend even more of your money through their plethora of marketing channels. The more times they put the marketing material in front of you, especially with your children around, the harder it is to say no.
- Without having any exact figures in front of me, the purchase of Lucas Films and the Star Wars franchise is likely going to pay for itself from this first movie installment. Disney is genius at taking a movie and turning it into additional revenue streams namely by re-packaging merchandise of all shapes and sizes for consumers to spend. I wonder how many millions of $30 lightsabers they sold in the past 12 months?
So what would be some of my investment ideas from the trip:
- Disney stock itself has always been a long-term position within our client portfolios for the past 5 to 10 years. The stock is up 276% over the past 10 years while the S&P500 is up almost 58%. The key to owning a stock like this is to rebalance the position as part of a normal asset allocation or rebalancing plan so it doesn’t become too big of a percentage of your total portfolio. By rebalancing, you are taking some of your profits off of the table and potentially adding to the position when the stock price is down. I realize that there is currently a big concern over the loss of subscribers at ESPN which is valid, but one of the greatest attributes about Disney is the multiple massive revenue streams the company has; Parks, TV, Movies, Merchandising, ESPN, and Licensing deals just to name a few.
- I’m not sure how Disney pulls together all of the data it collects from its customers, but there are specific companies out there that help companies collect and analyze this type of data in order to create plans to drive you to spend more of your money with a company such as Disney. Disney is not the only consumer company trying to find out everything that they can about you so this may be an up and coming industry to follow.
Of recent news, I can see why a company such as Comcast with a portfolio that already includes Universal Studios, has agreed to buy DreamWorks Animation for $3.8 billion. Because of the business diversification that I just referred to that Disney carries, there is really no other player/business that is in Disney’s ballpark. It will be interesting to see how this competition between Disney and Comcast plays out.
What I am Reading
I Hate This Market, I Love This Market (WSJ)
This is how the NFL hopes to keep its players from ending up broke (MarketWatch)
Costco’s new credit card has some of the best rewards in the market (Yahoo Finance)
Since the Recession, We’re Spending Again—But With Less Income (WSJ)