By Malcolm Berko
Dear Mr. Berko:
My broker wants me to buy 300 shares of Disney for my growth and income account. He subscribes to Value Line, whose analyst writes that the stock will go to $65 in the next 36 months. That sounds too good to be true. So can you give me your opinion on the stock? My next question concerns my sister who lost her job, has no savings and owes twice what her house is worth. She heard an advertisement on Sirius Radio by a company called No More Mortgage. She asked me to call because sometimes she’s not very bright and does not understand numbers, and they want $6,500 from her upfront. They advertise that, no matter how large your mortgage, it can be paid off in less than five years. Before I call them, would you tell me if it’s legitimate?
N.L., Phoenix
Dear N.L.:
Walt Disney (DIS – $36) is a company that’s in the business of providing happiness without borders. It sells wholesome goodness, mixed with kindness, miles of smiles and uncomplicated fantasy to hundreds of millions of people all over the world. In fact, my grandson said that if he were king, he would “turn the U.N. over to Disney (and McDonald’s), and the world would be always happy and well fed.” Who can argue with that?
And who can compete with the Magic Kingdom, Epcot, Disney-Hollywood Studios, ESPN and ABC TV, Tokyo Disney, Disney Resorts in Hong Kong and Paris, Marvel Comics, Disney Cruise Lines, Radio Disney with 46 stations, plus books, magazines and an enormous cast of huggable, loveable characters. And last year, while spreading happiness and laughter among children and adults on every continent, DIS generated $35 billion in revenues earning $3.2 billion or $1.76 a share. As you know, 2009 was supposed to have been a very bad year, indeed!
Though the shares have more than doubled from its 2009 low, I think DIS has a few more points remaining in its stock price. There are positive signs that local advertising is picking up while higher affiliate rates and higher subscriber growth augur well for DIS’s cable TV operations. Attendance at DIS parks and resorts is improving, while DIS Studios expects to have several strong releases in the next dozen months. And licensing rights from Marvel’s Iron Man, Spider-Man, The Incredible Hulk and X-Men plus film rights will help DIS’s bottom line. DIS’s world-class brands across multiple platforms are unparallel in media history. This company has a cornucopia of characters, icons and properties that children seek and parents trust.
Now, I seriously doubt that DIS will trade in the mid-$60s, as Value Line believes. And considering Value Line’s pressing problems with the SEC, I’m uncomfortable with price projections from any of their analysts. The stock hasn’t traded over $43 in the last 15 years, and considering that DIS expects annual growth revenues between 4 percent and 5 percent, I can’t imagine a $65 price by 2013.
DIS has a strong balance sheet, improving net profit margins that are getting stronger and a healthy cash flow, but I doubt that DIS can top $45 in the next 36 months. So I think your broker may be smoking too many of those Left-Handed Luckies. And considering DIS’s niggardly dividend, I doubt the stock has enough gas to be a good investment for your goals.
The Sirius Radio (SIRI – $1)advertisement No More Mortgage appears to be a legitimate fraud. I’ve had several phone conversations with Terry at NMM, whose unctuous, over-friendly phone manners soured my stomach. I suggest you Google “No More Mortgage.” Most of the postings will make your skin crawl, your teeth itch and your tongue numb. If the postings are to be believed, NMM is a nasty scheming business that preys on a growing class of Americans that sociologists call “the stupids.” And many of these people are SIRI listeners with room-temperature IQs and believe that a W-9 is a female police dog. Sirius is a magnet for scam artists. Meanwhile, barring a miracle, there’s nothing you can do to help your sister.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com. © 2010 Creators Syndicate Inc.
