#Portfolio Management 14 April 2025

These are my thoughts on my own market moves. Gosh it is pretty scary. So I am writing it down to so that I can reflect on the thought processes that I used to make these decisions.

##Portfolio Structure

Cool. So I am splitting my portfolio into a 85/15 split between a set of alpha and beta holdings. Alpha holdings are the core compounding assets. Beta assets are the interesting assets to own in the porfolio, but they introduce risk to the porfolio. In this case risk is good, I will be exposing my portfolio to the opportunity to 10X part of my portfolio. Hopefully this will materialize. But I will be also be exposing myself to possibly loosing that money too. But yeah, hopefully that doesnt matter.

The alpha assets are more stable holdings that are used to act as a baseline for the rest of the portfolio. These assets are designed to keep up with the market and keep my portfolio in the game. Currently my alpha is made up of 10X Global ETF, and Bitcoin. I need to diversify this further by including some kind of mineral. Currently I am looking into silver, and want to also look into PGMs. I think there are opportunities in both of these markets, and I can happily buy a mine that produces either.

The juice in this meet is mostly in the beta though. The beta is the interesting part of the portfolio. But it is only allowed to be interesting if the beta is managed well enough. My beta assets are split into three stocks that I will be buying into: one tech company, one consumer retail company, and lastly a company in the resources sector.

So each company will make up 5% of my total portfolio. This is pretty high. But it is a risk I am willing to take. At some point I might end up diversifying this further. This is just a small step towards portfolio management.

Cool. So that was my intro, I didn’t want to put the cart before the horse and felt that I needed to get down the portfolio construction before I do the sexy part of stock picking. The first stock that I am wanting to pick is the retail stock of the beta part of ny portfolio (NYSE: Dis).

But first, why did I decide on Disney?

At first I was stuck between the Nike (NYSE:NIKE) and the Disney (NYSE:DIS). The idea with choosing between these two companies was to find retail companies that have deep consumer brands that people recognise throughout the world. This was inspired by Warren Buffet’s reason of choosing to invest in Coca-Cola back in the 90s.

On top of this, I want to buy into a company that is in the trough of consumer sentiment. This is important to me because it seems like most stocks in the NYSE is currrently overvalued and most of this excess value comes from the market sentiment. I am using a periodic dip in market sentiment, that is reflected in price performance. Nike and Disney seem to meet these requirements. So the choice is between them.

The main reason I chose Disney over Nike is that when I compared very superficial financial comparison. At least superficially, Disney is operating succssfully. It is profit generating, and growing. This is a positive reflection even with the negative short term sentiment around Disney.

When I look at the financials, Disney is also managed really well. It has reduced its leverage significantly, and it represents a lot of value.

I also like that Disney’s physical brick and mortar assets are spread accross the world. This reduces Disney’s risk to geopolitical concentration and its affect to Donald Trump’s trade war.

Nike on the other hand is heavily affected by the trade war, and I want to reduce my exposure to that. Nike manufactures most of its aparel in Vietnam and most of its sales are made in the USA. I see significant pain experienced by Nike. I will keep it on my radar and it might become a beta play in the next couple of years.

How I felt buying Disney

I felt a little rushed in deciding to buy Disney. But in reality, I was not rushed at all. I actually took waay too long to action the decision. My buying point was when the stock hit 80 USD. It did hit 80USD in the 2025 market crash. So I am going to buy R50 000 worth of it. I also don’t like the cost of buying this share on Easy Equities because of the transferring of ZAR to USD. So I might look into reducing this cost because I am wanting to buy the other stocks in other financial markets (Possibly AUD, Thailand, or China).

I am buying this stock on 14 April 2025. The stock price is currently 84USD. Two weeks ago it was 120USD. The market was shocked by Donald Trump’s trade tarrifs. The irony of this is that I am celebrating this huge decline in the cost of the NYSE:DIS stock. But at the same time, the value of the ZAR decreased in relation to the value of the USD. So on one hand I beat the market. While on the other hand, it beat me.

This is a long term buy, and I will be DCAing into the stock on a monthly basis. I am hoping to continue doing this until I retire one day. So in a sense, there is no exit strategy. But I know that is something I do need, an exit strategy. So when will I exit the Disney Stock?

Flip, it is hard to think of reasons for this. But I don’t want to exit based on a life event. It might be that when Anwen and I get married, buy a house, or make a big life change, I could end up liquidating the portfolio which would include exiting the stock.

A second reason of exiting the stock, won’t be around price action. I like to think of that I can ride out price action. But one thing that will make me action my exit strategy would be obvious business risks. These include the fundamentals of the business changing significantly, or external regulation pressure. I would not want to continue buying shares in Disney if they get unfairly bullied by governments, or their industry through regulations.

But I am not too concerned about consumer sentiment if it does not reflect negatively in the companie’s fundamentals.

I also had a look into the brands that Disney owns, and they are pretty impressive. We engage with these brands almost daily. Almost everytime we switch on our TV. Gosh, I just googled the list and it is pretty crazy: List of assets owned by the Walt Disney Company - WikipediaList of assets owned by the Walt Disney Company - Wikipedia

I will add to this list over time. But for now, this should be okay.

ChatGPT Financial Analysis

Nike Financials

1. Earnings Growth

  • Recent Performance: In its fiscal third quarter, Nike reported adjusted earnings of $0.54 per share and revenue of $11.3 billion, surpassing expectations. ​Barron’s

  • Future Outlook: Despite the positive quarter, Nike warned of potential revenue and profitability challenges ahead, including a possible double-digit decline in sales. ​New York Post+1Barron’s+1

Assessment: While Nike has shown resilience in recent earnings, the forecasted challenges suggest caution regarding sustained earnings growth.​

2. Valuation Metrics

  • P/E Ratio: Trailing P/E is 24.25, and forward P/E is 43.05.​StockAnalysis

  • PEG Ratio: 13.66, indicating a high valuation relative to expected growth.​

  • P/B Ratio: 8.20, which is considered high.​

Assessment: Nike’s valuation metrics suggest the stock is priced at a premium, which may not be justified given the anticipated earnings challenges.​

3. Debt Levels / Financial Health

  • Debt-to-Equity Ratio: Approximately 0.86 as of November 2024, indicating a moderate level of debt. ​GuruFocus

  • Interest Coverage Ratio: Nike’s EBIT is $5.9 billion, with an interest coverage ratio of 20.84, suggesting strong ability to meet interest obligations. ​Simply Wall St

Assessment: Nike maintains a healthy balance sheet with manageable debt levels and strong interest coverage.​

Overall Evaluation: Nike demonstrates solid financial health but faces potential earnings headwinds and appears overvalued based on current metrics. Investors should weigh these factors carefully when considering an investment in Nike.

Disney Financials

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Here’s how The Walt Disney Company (NYSE: DIS) measures up against three key objective stock-picking metrics:

1. Earnings Growth

  • Recent Performance: In Q4 2024, Disney reported a 39% increase in earnings per share (EPS) to $1.14 and a 6% rise in revenue to $22.57 billion.

  • Future Outlook: The company anticipates high single-digit adjusted EPS growth in 2025 and double-digit growth in 2026.

Assessment: Disney demonstrates a strong earnings rebound with promising growth projections.

2. Valuation Metrics

  • Price-to-Earnings (P/E) Ratio: 32.08 (trailing), 18.10 (forward)

  • PEG Ratio: 1.42

  • Price-to-Book (P/B) Ratio: 1.75

Assessment: The forward P/E suggests a more favorable valuation relative to expected earnings growth. A PEG ratio of 1.42 indicates that the stock is reasonably valued when considering its growth prospects.

3. Debt Levels / Financial Health

  • Debt-to-Equity Ratio: Approximately 0.42 as of December 2024, down from 0.63 in 2020, indicating a steady reduction in leverage. citeturn0search2

  • Interest Coverage Ratio: 7.7x, suggesting that Disney comfortably meets its interest obligations. citeturn0search5

Assessment: Disney’s decreasing debt-to-equity ratio and strong interest coverage reflect prudent financial management and a solid balance sheet.

Overall Evaluation: Disney exhibits robust earnings growth, reasonable valuation metrics, and a healthy financial position, aligning well with objective investment criteria.

Would you like assistance in comparing Disney to other companies or exploring additional investment metrics?