Geoff Gannon February 24, 2006

On a Few Quick News Items

Energizer Holdings (ENR) reported earnings yesterday. The stock was up about 10%. I mentioned Energizer Holdings (among many other stocks) in three posts:

On Friday’s Price Drop

On the Rationale for the Overstock Post

On Thirty Interesting Stocks

Disney (DIS) is reported to be about to make an offer to buy Pixar (PIXR). According to some reports, the offer will be made today. Disney is also expected to accept an offer for its ABC radio assets sometime within the next two weeks.

Is Pixar worth $7 billion (or whatever the offer ends up being)? That’s a complicated question. First of all, you have to ask if $7 billion of Disney’s stock at today’s market price is actually worth more or less than $7 billion. What’s the chance that Disney’s stock is currently undervalued and Pixar’s is currently overvalued? It’s a real possibility.

On the plus side, this could mean Disney CEO Robert Iger wants to take Disney in a different direction from what we’ve seen lately. I’ve always thought the real value at Disney would come from providing content not distributing it. If the company really wants to be some sort of “diversified entertainment company” wouldn’t a company built around kids make more sense?

A company focused on animation, theme parks, the Disney Channel, etc. would make more sense to me. In fact, a few years ago, I would have been very happy if Disney announced an acquisition of a toy maker, video game publisher, or licensing company that had something to do with entertaining kids. Today, a lot of Disney’s business isn’t in places where Disney’s powerful kid – oriented properties can be leveraged.

Pixar fits into the kind of company I’d like to see Disney become, but that doesn’t necessarily mean acquiring Pixar is a good move for Disney. After all, Fox Family fits into the kind of company I’d like to see Disney become, but when Eisner decided to buy Fox Family and rebrand it as ABC Family, I though it made no sense (especially at the price he paid). We’ll have to wait for details on the acquisition, but it’s hard to believe Disney is getting much of a bargain here. Still, it’s a step in the right direction.

Over at Value Discipline, a new post just went up entitled “Valuation, Technical Analysis, and Expertise”. The expertise part is especially worth reading.

Happy Hunting