When most of us hear the name “Disney” we think of Disney World, Disneyland and princess movies. However, Disney (tkr: DIS) operates in five broad segments: Media Networks (including flagship ESPN), Parks and Resorts, Studio Entertainment, Consumer Products and Interactive. Revenues for 2014 were about $49 billion, with Media Networks driving just under half. Earnings per share have grown steadily in the last several years.

Our thesis for owning Disney is that the company continues to successfully create content “franchises” that can be monetized repeatedly across its business segments. For example, the movie “Frozen” was a huge box office success. It has been released to video in the US and overseas, has generated merchandise sales at Disney’s retail stores and Elsa and Anna, the two main characters, are now part of the princess cast that wanders Disney’s resorts. Robert Iger, CEO since 2005, has been the driving force behind this “franchise model.” He has also made several strategic acquisitions, including Pixar, Marvel and Lucasfilm. The Marvel franchise in particular has been extraordinarily lucrative, as individual characters (for example, Iron Man) and groups of characters (the Avengers) have been featured in multiple movies. The first “reboot” of Star Wars is scheduled for release in December 2015, and lest anyone think that audiences have lost interest during the long dry spell since the last movie, 88 million people watched the trailer in a 24-hour period.

While Disney’s valuation is higher than that of its peers, its ability to create and monetize content is unparalleled, which is why we find it an attractive core holding.

Previous featured equity follow-up: Whole Foods Market

Whole Foods’ (tkr: WFM) stock price has taken a “round trip” since we bought it in November, rising over 40% and then returning to our cost basis in June. The market’s concerns about slowing same-store sales growth and the company’s announcement of what sounded to many analysts like a half-baked small store concept more than outweighed what we believe to be the stock’s strong fundamentals and low valuation. We elected to hold the stock while the company’s growth strategies play out; we think the market has already priced in potential downside and perhaps overreacted. As the leading retailer of organic foods in the US with a strong reputation for quality, Whole Foods has ample opportunity to gain market share as it expands its footprint.

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