Activities: Recent Stock Buys
Posted on 24. Aug, 2011 by TheFreeInvestor in Portfolio, Stock Analysis
I have been continuing to buy small positions as my favorite watchlist stocks get hammered in these volatile markets. I don’t know what will happen with these stocks in coming days or months. But, I am buying these stocks with the intention to hold it for a long time. So, I am going to measure my success/failure in years to come. Here are the two stocks I added recently.
Disney (DIS): As you can see in my post on Digital Entertainment Trend, I love Disney as one of the top content creators in the world. Till the recent market volatility, I didn’t find a good price point to open a position. Finally, last week I took advantage of the market turmoil and added some house of mouse a.k.a Disney stock to my portfolio. Probably I don’t need to write a lot about the story of Disney’s origins as even a child, or especially a child, knows the core business of Disney. Micky Mouse and rest of the Disney characters have dominated the imaginations of children for decades. Over the years Disney has built a large entertainment powerhouse that includes
- Media properties: ABC Network, Disney Network, and crown jewel ESPN
- Parks and Resorts, including cruise Disney Dream
- Movies, including the PIXAR studios: Pirates of the Caribbean series, Toy Story series
- Consumer products from merchandising and interactive media
Here are some of the reasons I like Disney –
- Widely popular iconic brand
- Long useful life of its audio-visual content
- Great assortment of best in class Franchises — Pixar, ESPN, Theme Parks
Currently, the stock is trading at only 13-14 times earning. I believe, the current price combined with more than 1% dividend yield underestimates the competitive advantage and value of Disney’s irreplaceable contents.
Lululemon Atheletica (LULU): My investment in Lululemon is a good example of Peter Lynch style of investing — buy what you know, go to shopping malls and use family/friends recommendations for investment ideas. Lululemon’s yoga inspired apparels are one of the fastest growing retail concept. My wife has used Lululemon products and highly recommends it. I like their unique approach to marketing by engaging local community of runners and yoga enthusiasts. Recently, Lululemon reported a 16% same store sale growth ! They have one of the highest revenue per square feet number in the industry. The company has a lot of room to grow in US and, other than Australia, the entire international market is untapped (except Canada where the company started its operation). It has a lot of characteristics that I like –
- Passionate and engaged customers who tacitly advertise the product/concept
- Great product and a growing lifestyle-oriented brand (similar to Starbucks, Whole Food etc)
- Differentiated product and business model compared to other retail concepts
- Founder driven ownership culture
At almost 50 times earning, the stock is definitely not cheap. But, if the company continues to grow rapidly, the current price will look justifiable in few years. I am happy to open a position at this level and will be looking to add more if the stock price keeps sliding down.
(Disclosure: As of the publication of this post, I hold long position in DIS, SBUX, WFM and LULU. Please read the full disclaimer on this website.)
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