 Good day, fellow investors. The market has been down lately, very difficult situation. And that's the time to revisit the great businesses that I have looked at over the last years, but that were always a little bit too expensive or overpriced, but still great businesses. So today I want to share my analysis of Disney. I reviewed the company again, looked at what I wrote and made a video about it a year or something ago, see what has changed and how that fits my investing style. So we're going to discuss Disney, what is the case with Buffett's purchase of Disney. And whether we are in a situation like he was in the 1960s, then we're going to discuss the fundamentals and the relative and absolute stock valuation of Disney. And that later you will see how the absolute valuation of the company, the business value and the relative valuation of the company, the speculative market value, which is also a very important factor when it comes to investing, fits your investment style and investment portfolio. Let's start. So just a quick fun fact. In 1966 Buffett purchased Disney and he bought 5% of the company for 4 million. He met Walt, he went there, he visited and he saw that Walt was investing 17 million for one new ride, just one new ride. Then he quickly figured it out, market capitalization was 80 million, buying Disney for what, less than five rides. The value of the park was 80 million alone. The rest, the brand, the Mary Poppins and everything was for free. So he purchased that. And now we are in a similar situation. We have Disney, everything that Disney is. And now we have Disney Plus, that is growing extremely fast. And if we compare it to Netflix, then just Disney Plus is worth as Netflix, which means that you get everything else for free. It's different. Then back then with Buffett were tangible assets and now those are intangible assets, but 50 years have passed and perhaps we are in a different world. So let's discuss the Buffett investment. So everybody says the error cost him 20 billion. I would argue it's not that. He paid 4 million in 1966, sold in 1967 for 6 million, 50% return in a year. The current value of Disney's 188 billion, 5% stake would be 9.4 billion. So turning 6 million into 9.4 billion, is that a mistake or not for Buffett? We have to look at the return on investment. For easier mathematical calculations, 50 years, 6 million into 9.4 billion, a yearly return of 15.8%. Add a 3% dividend and buyback yield over time, let's say. And we are at a return of 19% per year. Compare that to what Buffett has done over the last 50 something years, 20.3%. So it's not actually a mistake for Buffett over the long term. And this is something very important to understand. He simply thought it was overvalued and solved when the margin of safety wasn't there. Now let's see about Disney. What is Disney as the investment? Perhaps you hear about Disney, but Disney is much more than Disney. ABC, ESPN, the Disney Channel, Disney brand, Pixar, Lucasfilm, Marvel, BumTech, 21st Century Fox, Hulu, that will become 100% of Hulu, Parks, Studios and much more. But this is the most important, this is the core of Disney. So you have strong brands, huge user base, everybody knows about Disney, a great business, good business that can scale its business and grow earnings and profits. Speaking of earnings and profits, let's discuss the fundamentals. Great year, 2019, the fiscal year was great with 70 billion in total revenues, 17% growth and good profits of 14 billion, 15 billion operating income. Diversified over media networks, parks and experiences, which is the largest contributor to revenues that is unfortunately now shut down. So we'll calculate the impact in a moment, studio entertainment, record box offices of 11 billion and direct of consumer and international close to 10 billion. Now what will be the 2020 impact? We can estimate parks to remain closed for 2020 and then slowly recover in 2021, but not to the 2019 level. Park revenue hit 50%, 25% in 2021, respective to 2019, media networks hit 25%, my YouTube revenue that is donated for charity, so please subscribe and click that notification bell, is also down 50%, even if views went up due to the situation. Studio, of course, it's closed, no work, no box office, 50% hit. However, Disney Plus, the new product launched in November 2019 is growing at a staggering pace. So I estimate that from the current 70 billion, the revenue should be around 50 billion in 2020, a bit better in 2021. And the company will not have any profits and no free cash flows for two years because operating expenses consisting primarily of labor, cost of goods, all the infrastructure, supplies, commissions and entertainment offerings, let's say can be balanced a little bit, so they will likely survive as the big chunk of their costs will not be there for a while. Now on evaluation, let's start with the absolute valuation. For Disney to return to normal, let's say in 2024 plus to get the Disney Plus growth, I estimate revenues of 100 billion. Disney Plus probably with 200 million subscribers times $10 a month will probably lead to $24 billion in revenue, a little bit of growth on the other segments. And you are at 100 billion at current margins with profits between 16 billion and 20 billion in a good year. So 5% growth over time plus a 6% business yield. That is the business valuation. If they continue to grow at 5%, then your return is around 11% per year, not a bad return for a great business from a business perspective. The current situation price earnings ratio is 17, 188 billion market capitalization divided by 11 billion in profits. Now, if the valuation remains the same, the stock in five years should be at 20 billion profits in a good year times 17, the price earnings ratio is 340 billion market capitalization, the stock price would be at 187, that implies a good return of 12.6% per year in five years. That's not bad if the valuation remains the same. So you are playing here the valuation game that it will remain at 70. If it goes to 10, you are not making any money with this investment, important to note. Now there is relative value. If we look at Walt Disney, the whole company, everything goes for 186, 188 billion depending on the current price. If we look at Netflix, 174 billion. The valuations are different, Disney 17, Netflix, 103 on questionable earnings, but that's a different story. I made a video a few months ago. You can check that. If we look at Disney Plus, so the service that has been launched in November, 10 million at start, 28 million in February, 50 million subscribers in April. So in six, seven months, they went from zero to 50 million subscribers. Netflix has 167 million subscribers. I can estimate that Disney Plus will reach Netflix's subscriber base, but by a year, two years. So from a market perspective, and given that Disney Plus has much more content, has cheaper content because they make it anyway, I think that just Disney Plus should be valued as Netflix. If that happens, you are buying now Disney Plus, compared to the value of Netflix, the rest of Disney is for free and the rest of Disney is what makes the money for now. So you have 10 billion plus another 10 billion in profits probably from Disney Plus, you're a 20-something billion and then the long-term returns of investing come. If the market suddenly starts thinking, okay, Disney Plus is as valuable as Netflix or the price of Netflix goes down or Disney Plus goes up. Also, a good discussion here. Just look at market share, how competitive it is and when it comes to such competition, what is the key? Content is king. It's all about content. Will Disney Plus have better content than Netflix? Well, it will really be a highly competitive game, which means that Disney will also get the good market share and probably also reach Netflix's subscribers. Now, what's the difference now between Disney and 50 years ago when Buffett was buying? The question is tangible and intangible value. Should we adapt as investors? So Disney's book value per share is, yes, 93 billion in stockholder equity, but that's all goodwill and intangible assets of 103 billion. 50 years ago, Buffett was buying the park, the tangible value. Now you are buying the intangible value. So that's the difference and you have to see how this intangible versus tangible value fits your portfolio. So to sum up business value, same valuation, the stock price should be 187 in five years. If suddenly somebody says Disney Plus is more valuable than Netflix, then add just 180 billion to the market capitalization. The stock doubles and that is also something that can happen over the next three years. So on one side, you have, let's say, a margin of safety in a business yield at 6%. The growth will depend on the situation in the markets with the economies, with demand, with the opening of tourist attractions. So that's something you have to keep in mind. It will be volatile and we cannot project how hard will Disney be hit, therefore, there might be even better opportunities. However, the long-term bottom is, I think, a 6% yield from a business perspective. The risk is it deteriorates over time or it slowly picks up. However, the upside is, okay, this is as valuable as Netflix, bam, the stock doubles from the current perspective or Disney Plus mitigates the impact on the parks, et cetera. So this is the situation. See how the absolute and the relative valuation, the risk and reward fits your investment style and whether Disney as a great business fits your portfolio. Now, I'm still looking, I'm comparing, I'm going through all my list of great businesses that I did analyze in the past and I'll see whether I'll dip into something or not or I want to learn more about this intangible then I buy something just for my learning portfolio where I have businesses that I want to follow really closely and then source for the other bigger, larger portfolios. Thank you for watching. You can check everything what I do on my website. There is my book, The Charities I Mentioned and a lot of more information. Subscribe, click that notification bell, comment and I'll see you in the next video.