Steve Job’s Ultimate Buy and Forget Stock
Do you ever think about which of today’s companies will be around a century from now?
You’d be looking for a company that has a strong enough business to survive no matter what. Whether there’s war, depression or natural disasters, you want a company with the resilience to withstand whatever comes its way.
To identify this type of investment, you have to be a visionary like Warren Buffett…
Or Steve Jobs.
Jobs is no longer with us, but he had the same foresight when it comes to investing his fortune as he did with Apple (Nasdaq: AAPL) products.
While Jobs was the visionary behind the iMac, iPod and iPhone, Apple stock represented only a portion of his portfolio. The bulk of Jobs’ fortune was in The Walt Disney Co. (NYSE: DIS).
After Jobs’ passing, many had expected his widow, Laurene Powell Jobs, to sell the family’s 7% stake in Disney. However, she has not sold a single share. It appears she’s confident in the company’s long-term future, and rightfully so — Disney is a 100-year stock.
DIS is up more than 33% over the past year, compared with the S&P 500′s gain of just over 16%. Powell Jobs’ stake is now worth over $ 10 billion. And over the past decade, Disney’s stock has outperformed the S&P 500 by more than 200 percentage points.
Disney is a great investment for the long term because the company is heavily diversified. It owns theme parks with hotels and golf courses, media networks, film studios, Disney consumer products and an interactive division for its Internet properties.
While Disney may be best known for its characters and theme parks, the ESPN sports network is the prime growth driver for the company. In the most recent quarter, ESPN drove the 15% increase in operating income for Disney’s cable networks division. Disney’s media networks accounted for $ 2.1 billion of its $ 3.3 billion in operating income during the quarter.
Part of what makes Disney such a compelling long-term investment is that the company owns and distributes its own content, which includes not only Disney’s own well-known characters but also characters from Marvel, Jim Henson’s Muppets, Pixar and now Star Wars. CEO Bob Iger has said his goal is to “buy either new characters or businesses that are capable of creating great characters and great stories.”
By owning its characters, Disney is able to make money across all of its properties: The company can use its characters in films, at its theme parks, on Broadway, and in related merchandise.
Disney also has a history of delivering superior results for its shareholders. Since Disney went public in 1957, its shares have risen at an annualized rate of 14%.
One of the prime reasons for Disney’s success is that the company has had only six CEOs in its 91-year history. The company has shown great stability in its long history, and this is a critical factor for a successful long-term investment.
Risks to Consider: A hundred years is a long time. While Disney owns an impressive collection of assets and is now run by a great management team, future management teams might not do as well. This happened to Disney before Michael Eisner took over as CEO in 1984. A number of box-office failures had led to a reshuffling of Disney’s board and management. A lot will depend on Iger’s successors.
Action to take –> Buy DIS and hang on to it for the next 100 years. Along the way, you’ll also collect a 1% dividend yield, which is only a 22% payout of earnings. This gives Disney plenty of room to increase the dividend.