During times like these, I find that the most difficult thing to do tends to be avoiding the urge to buy everything out there, at what many seem to be rock bottom prices.
After all, it isn’t every day that world-class companies like The Walt Disney Co. (NYSE: DIS) go on sale, and at these current prices, the temptation to continue to buy stocks regardless of near-term risks related to this pandemic-related economic shut down can seem like a good idea. Here is why I think it’s time to be cautious.
Disney is an exceptionally good example of a business that is extremely hard to value, because of the layers of diversification built into the company’s business model. Diversification of revenue stream in generally viewed positively over the long-term.
However, in times like these, determining what the ultimate impact of the coronavirus pandemic will be in these company’s future cash flow is difficult. We all know theme park’s media division, producing dozens of blockbuster multi-billion-dollar box office hits in recent years, has been forced to delay the theatrical release dates of number of highly anticipated films.
On the flip side, the Disney+ platform has paid immediate dividends, with more than 50 million subscribers using these using this service since inception a few months ago.
The question for investors, then, is how these competing forces are likely to play out over the coming quarters. I’m not overly eager to buy anything yet as I believe we could be due for more downside (being early may not be good), meaning Disney is staying on my watch list for now.
Invest wisely, my friends.