In a recent announcement from The Walt Disney Company (NYSE:DIS), the famous entertainment brand will pay 15% higher annualized dividends to its investors, with semi-annual payments of $0.66 per share payable on July 29 to the investors of record on July 6, a yield of about 1.14%. One of the primary reasons for this dividend boost is the success of the “Frozen” franchise, which has carried Disney to large revenue increases through heightened merchandise sales, even more than a year after it became the highest-grossing animated movie ever. In addition to Frozen, two of the latest releases of the company, Avengers: Age of Ultron and Cinderella have topped the domestic film markets, while Pixar’s Inside Out had a record opening weekend last weekend. It has been a successful run for the media production company under the leadership of its CEO Robert Iger, as Disney’s shares have grown in excess of 140% during this period, dwarfing the 58% gain registered by the S&P 500 during the same stretch. Despite the amazing performance of Walt Disney in the past few years, it is difficult to deduce whether the stock will continue growing or slow down in the future. Let’s look at the market sentiment concerning the stock by analyzing the recent insider activity and positions of hedge funds in the company.
Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 142% over the last 32 months, which is more than 84 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
Is The Walt Disney Company (NYSE:DIS) a splendid investment today? Hedge funds seem to think so, as they are in a bullish mood. The number of long hedge fund bets inched up by six recently, with Disney being in 64 hedge funds’ portfolios at the end of the first quarter of 2015 among the funds we track. There were 58 hedge funds in our database with Disney holdings at the end of the previous quarter. The net value of their investments worth $4.37 billion. with net investments of $3.60 billion.
Tracking the activity of insiders and hedge funds in a stock can tell us a lot about its potential. Hedge funds are run by some of the best minds and analytical teams in the financial world, giving their collective opinion tons of worth. Insiders likewise, know more about their company than anyone else. When we look at the insider activity at Disney, we see that there have been a number of sales in the last couple months. CEO Iger sold 200,000 shares on May 11, EVP and Chief HR Officer Mary Parker sold over 139,000 shares in early June, her entire stake in Disney. And EVP of Corporate Strategy and Business Development Kevin Mayer sold just under 100,000 shares on May 19.
With all of this in mind, we’re going to review the fresh hedge fund action regarding The Walt Disney Company (NYSE:DIS).
What does the smart money think about The Walt Disney Company (NYSE:DIS)?
Heading into Q2, a total of 64 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes considerably.
According to hedge fund intelligence website Insider Monkey, Ken Fisher‘s Fisher Asset Management had the biggest position in The Walt Disney Company (NYSE:DIS), worth close to $881.3 million, corresponding to 1.8% of its total 13F portfolio. Sitting at the number two spot was Lansdowne Partners, led by Alex Snow, holding an $880.6 million position; 7.9% of its 13F portfolio. Other members of the smart money with similar optimism include Eric W. Mandelblatt’s Soroban Capital Partners, Phill Gross and Robert Atchinson‘s Adage Capital Management, and Tom Gayner’s Markel Gayner Asset Management.
As one would reasonably expect, some big names were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, established the most valuable call position in The Walt Disney Company (NYSE:DIS). Laurion Capital Management had $156.1 million invested in the bullish position. John Armitage‘s Egerton Capital Limited also initiated a $64.7 million position during the quarter. The following funds were also among the new Disney investors: Alexander Mitchell’s Scopus Asset Management, Malcolm Fairbairn’s Ascend Capital, and Nick Niell’s Arrowgrass Capital Partners.
Given the bullish hedge fund sentiment and invaluable brands Disney owns, it’s hard to bet against this company right now. While it might be close to nearing the limits of its valuation at a nearly $200 billion market cap now, we still recommend a buy on the stock.
Disclosure: None
