Disney’s Not Clowning Around

Entertainment mainstay gains in hot market

It’s no joke when your company’s stock rises more than 30%, outdoing the S&P 500 in a year when the index gained a robust 20%. Not only did Disney do just that in 1996, but by some indications, its shares still haven’t come to a halt.

Since the folks signing Mickey Mouse’s paycheck appeared in BLACK ENTERPRISE last August, Disney’s shares have leapt from $62.38 to $82.13 a share, a 31% gain that would have turned $1,000 invested into $1,310 over the course of the year. Hamilton Lewis, principal of Hamilton Lewis Capital Management in Houston and the money manager who chose the stock (800-848-7141), says the fun isn’t over, and Disney could well surpass $ 100 in the next 12 months ahead. “You’ve got a premier entertainment company, a superb franchise, not only a major movie producer but ESPN, ESPN2 and ABC as well,” he says, “This company has almost every facet of media covered.”

The outlook for Disney is favorable on Wall Street too. At the end of March, entertainment stocks had gained 10% on average, outperforming the S&P 500. As one of the biggest movie houses in Hollywood, Disney should benefit from an increase in demand for programming brought about by growth in cable television. Disneyland, Disney World and the company’s trademark theme parks, meanwhile, are enjoying a boom period, with operating income up 17% in the most recent fiscal quarter.

Analysts feel Disney is on track to grow earnings 17.7% annually for the next five years, compared with 17.4% for the company’s peer group of mediaconglomerates, and a mere 6.7% for the S&P 500. As of this writing, the only thing detracting from Disney’s stock is its price, which now hovers at nearly 30 times projected 1997 earnings, compared with an average price-to-earnings ratio of 20 for the S&P 500. That’s no deterrent to Lewis, however, who says shares have at least a 22% gain ahead this year. “It’s a franchise you have to love.”

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