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Bob Iger is back and Disney says it will be profitable in 2024

Bob Iger is back and Disney says it will be profitable in 2024
Bob Iger is back and Disney says it will be profitable in 2024

The Motley Fool Take

Bob Iger is back: The executive who helped build Walt Disney into the entertainment titan it is today recently returned to his position as CEO. Iger oversaw Disney’s acquisitions of Pixar, Marvel and Lucasfilm, all of which have continued to be profit powerhouses for the company. Now, Iger aims to build the Disney+ streaming service into another potent profit driver.

With more than 164 million subscribers as of October 1, Disney+ is already a formidable force in streaming. Combining that with over 24 million customers for ESPN+ and 47 million for Hulu, Disney’s total number of streaming subscribers exceeds 235 million.

However, Disney’s streaming business is not yet profitable. The direct-to-consumer division that includes Disney+ generated an operating loss of nearly $1.5 billion in the most recent quarter as the company spent heavily on bolstering its already impressive content library. Management expects Disney+ to reach profitability in fiscal 2024, thanks in part to recent price increases and a new ad-supported plan.

As the streaming business begins to contribute to profit generation, investors should get a better sense of Disney’s true earnings power, which should boost its share price. You can buy ahead of these likely gains because Disney stock is down 44% in 2022. (The Motley Fool owns stock in and has recommended Walt Disney stock and options.)

Ask the fool

From LR in Portland, Ore.: I have some extra money. Should I pay off my car loan or invest in the stock market?

The Fool replies: It depends on. First, pay off high-interest debt, such as from credit cards, and make sure you have an emergency fund ready with three to six months’ worth of living expenses.

Then you compare interest rates and growth rates. Know that the stock market’s long-term average annual growth rate is around 10%, although it may be higher or lower over your particular investment period. For example, if the interest rate on your car loan is 9%, it is very reasonable to pay it off. If the interest rate is 4%, you might want to invest this money in stocks.

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Depending on your risk tolerance, it may be worth paying a little in interest while aiming to earn more through equity appreciation. Just make sure you invest for the long term.

From CH in Grand Rapids, Mich.: What are activist investors?

The Fool replies: They are often managers of hedge funds or private equity companies who buy many shares in a company to influence or pressure management. Sometimes they even get on the board.

Activist investors will often target large companies they see as inefficient, publicly pushing for changes such as cutting costs, spending more on dividends or share buybacks, replacing executives, taking the company private or breaking up the company.

Carl Icahn and Bill Ackman are two well-known activist investors. Icahn has bought large stakes in companies such as Apple, eBay, Dell, Netflix, Motorola and Yahoo in the past; Ackman’s targets have included Target, JC Penney, Herbalife and Canadian Pacific Railway. Each of them has achieved some goals and snubbed others.

Fool’s School

Figuring out when is the right time to buy a particular stock can be difficult enough, but good investors also need to know when to sell. Here are some of the many good reasons why you might want to sell a stock:

— If you expect to need that money within five years. If you need it liquid, it will be safer in something less volatile than the stock market, such as a certificate of deposit or a money market account.

— If the reason you bought shares is no longer valid. (For example, perhaps the previously impressive leadership is involved in a scandal.)

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— If you have so many stocks that you can’t keep up with them. Selling the ones you don’t have a lot of confidence in can be smart.

— If a share appears significantly overvalued. But think through the tax consequences. If you expect it to continue growing for many more years, it may be best to hang on.

— If you find a much more attractive investment. If your calculations suggest that one holding is now reasonably valued or overvalued and shares of another good company appear to be severely undervalued, you can get more in the other stock. (But consider the tax implications.)

— If you don’t remember why you invested in the share.

— If you can’t explain exactly how the company makes money.

— If there are red flags such as shrinking profit margins or high debt. Temporary problems can be OK, but watch out for long-term problems.

— If you only care for emotional reasons.

These reasons to sell are all good. There are bad reasons to sell a stock too, such as selling just because the stock or the overall market fell sharply, or because you’ve heard disturbing rumors about the company. Always do your own research and think for yourself before you sell.

My smartest investment

From SD, online: My smartest investment has been buying shares in Kinder Morgan over time. It is one of the largest pipeline companies in the US and is less dependent on oil prices than it appears. Many years ago, the share price had fallen along with the price of oil, which gave me a great buying opportunity. The first stocks I bought have yet to show positive returns, but dollar cost averaging can take care of that over time.

The Fool replies: You were good at not only buying Kinder Morgan stock in the past, but continuing to do so over time. It is smart to focus your money on the investments you have the most confidence in. Do not hold too few shares, but; aim to diversify your money across 25 or more (in different sectors). After that, it might make sense to keep adding to some of your current holdings.

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Dollar cost averaging (investing a fixed amount at regular intervals) is also an effective strategy: When stocks are high, you’ll buy fewer, and when they’re down, you’ll buy more.

Kinder Morgan is a profitable business, generating billions in free cash flow annually – and the dividend recently yielded a whopping 6.1%. Some worry about the company’s future as the world transitions to alternative energy sources, but Kinder Morgan is investing in some options — for example, aiming to convert landfill-generated methane into renewable natural gas.

Who am I?

I trace my roots back to 1932, when two guys started a household business selling plaster gnomes, garden swings and more. In 1935, they bought a bankrupt sawmill in Vermont for $25,000, with the aim of producing their own furniture. I debuted a line of colonial-style furniture in 1939, named after an early American hero. I took the hero’s name in 1969. Today I am a large interior design company and manufacturer and retailer of home furnishings. I own 10 manufacturing facilities (including a sawmill and lumber yard) and approximately 75% of my items are made in North America. Who am I?

Don’t remember last week’s question? Find it here.

Last week’s trivia answers: Pitney Bowes