Buy Walt Disney for a touch of magic

And yet Disney’s share price has been in decline in recent months as investors worry that negative cable TV trends in the US, alongside the rise of Netflix, will hamper future growth. What the bears seem to be forgetting is that Disney is one of the world’s biggest (and most loved) brands, it has an immense library of film and TV content, in additional to which it owns a portfolio of hugely popular theme parks, resorts and cruise liners.

Financially, it is also very impressive. In 2017, operating margins hit 27 per cent, up from 24 per cent just four years prior. In 2018, earnings per share are forecast to grow 21 per cent to $6.89, which means shares trade on just 15 times forecast earnings. What's more, Disney boasts impressive three-year average free-cash conversion of around 90 per cent. All considered, the rating looks particularly stingy when compared with Netflix, which has a PE ratio of 96 times and a forecast free cash outflow of $3.2bn in 2018.

And talking of Netflix, Disney is developing a product which could unseat its dominance in digital TV. In late 2017, the group acquired streaming specialists BAMTech for $1.6bn, which has provided Disney with the technological capabilities to stream high quality content, serve advertisers with dynamic ad insertion, gather data and personalise channels. Using this, the group has recently launched a digital service for its ESPN sports channel in the US, which analysts at RBC Capital Partners think could attract 50m subscribers. Considering ESPN content reaches over 200m people, the long-term potential for this service is enormous.

Meanwhile, Disney has been pulling its content from Netflix in preparation for the launch of its own film and TV streaming service in 2019. The production studio will provide the service with some to-die-for content, including the follow up the Infinity War, Toy Story 4, a live-action version of the Lion King and Frozen 2. That’s on top of the stream of box-office hits that will grace the big screen this year. In the financial year to September 2018, Disney Studios is expected to generate $9.3bn of revenue, up 11 per cent on the previous year. In the year to date, Disney’s films have accounted for 31 per cent of global box-office takings, according to Box Office Mojo.

And then there is the resorts business which benefits from the strength of the studio’s beloved characters. The opening of Toy Story Land within Shanghai and Orlando Disneylands this year, with Star Wars: Galaxy's Edge following in California and Orlando next year, should attract more visitors. The addition of three new ships will expand the capacity of the cruise business as well. In the first half, revenues in resorts grew 13 per cent to $10bn, and that pace of growth is expected to be maintained for the remainder of the year.