Why did the buffetsbooks.com course 2 got it wrong on DIS?

In the second course on buffets books.com mentioned that you wouldn't invest in DIS but that was in 2012 when DIS was trading at 44 but after that it had a meteoritic rise to 120 which is a thee bagger. Why?

Answers

  • I had the same question.
  • I was also wondering about this???
  • Interesting and very important question.
    I would answer this as follows:
    Only when you have fully understood, why the course did NOT get it wrong on DIS, you can even start to consider yourself a value investor.

    So what did the course show? It showed that based on a reliable model, DIS was overvalued in 2012 and therefore no good investment. This conclusion was correct then is still correct now when looking back from 2017.

    Okey, but then why did DIS triple in price since 2012? Very simple: Speculation.
    We are currently in one of the largest equity bubbles ever - which will implode for sure.
    So I am very confident that DIS will eventually again decline in price.

    But even if the stock does not decline: Value investing always means to be on the safe side - even if this implies that several times you miss out on investments that turn out profitable. This is the price you have to pay.
    But that is not important! If there are 1000 good investments, you can afford to miss 995. If only you manage to catch 5, you still get rich.
    Remember the 3 Buffett principles:
    1) Never loose money
    2) and 3) see principle 1)
    What this means: We never speculate. We only invest, if there is a very good risk-return ratio with a large margin of safetey.

    In the case of DIS this was not fullfilled. So the assessment of the course was perfectly correct.

    Hope that helps a little

    Christoph







  • edited January 16
    Thanks for highlighting this Christoph, I definitley reached out of the value range when I picked this up this up on a recent dip. I just figured they would still be making money in thirty years. It is hard as I want to buy companies like P&G, JNJ, Pepsi, Disney etc but they are all overprice. When looking at things like moat can you assign any intrinsic value to that in your valuation model or these are just the ones you have to be patient for?

    Also is there certain industries like consumer staples etc that carry a premium due to their non cyclic nature? I know a lot of the food companies are overprice but at a certain point do you have to look at historical P/E ratios for those industries or is generally bellow 15 good? Where might a resource be to look at historic norms for this?

    I guess I have not been in the market long enough to be burned so bad.

    I get the feeling if Disney does make a play for Netflix there could see some proper correction to the share price. The other key piece being the new CEO yet to come in and the re-modelling of ESPN's subscription model. AT least their film division is having lots of success. The one good thing about a Netflix play is Disney already has a lot of content, production and studios to support them, they also may be able to use Netflix as a way to add ESPN as additional content and streaming service. This is me reaching a little bit.

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