We are recommending buying Disney to 2% and selling Sanofi to fund the purchase, remainder from IVV.
Disney Investment Thesis:
- Disney is a global media and entertainment company that owns a massive library of intellectual property.
- Their competitive advantage is their evergreen brands and synergistic business model. Disney can create content that builds off existing franchises and can be monetized across all their business, giving them the ability to create higher budget, quality content and an ever growing library of IP.
- New direct-to-consumer (DTC) initiativewill strengthen synergies between businesses and lead to structurally higher margins and higher multiple on recurring revenue business.
- Recent Fox acquisition improves their content positioning and global growth opportunities.
- High quality company with solid balance sheet, strong FCF generation and ROIC.
Rationale for selling Sanofi:
· Our portfolio is overweight in Healthcare which prompted our review of names we own in this sector:
· Top line growth is below other healthcare names we own
o Their biggest drug (Lantus) has seen big decline in sales in the past 5 years, as have other Pharma names, but other drugs developed by SNY have not offset the decline in $
o Although Genzyme has been a successful acquisition story, it took Sanofi 7 years to execute on another major acquisition (Bioverativ) that could bring back some top line growth (which hasn’t materialized yet)
· Their Vaccine segment saw some headwind from its Deng vaccine program in the Philippines, possibly resulting in 100 children deaths.
· While its dividend is attractive (4.2% yield), the stock has not delivered on expectations
$DIS.US
$SNY.US
[tag DIS]
[tag SNY]
Sarah Kanwal
Equity Analyst, Director
Direct: 617.226.0022
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square, Suite 500
Boston, MA 02109