Walt Disney Co. recently released a sneak peek of the company’s new streaming platform Disney + and this set off another round of speculation on what the global media landscape will look like in the future. For investors looking to understand where the industry’s been and where it’s likely to go, I haven’t seen a better source than Stratechery’s Disney and the Future of TV.
Written by former Apple and Microsoft employee Ben Thompson, the column begins with a history of television from a business perspective, and details the impact of the internet on the medium so far.
Conventional wisdom is that Disney + will compete with Netflix Inc. for viewers – the two services are extremely similar on the surface – but Mr. Thompson argues this isn’t the case. Whereas Netflix is limited to aggregating and distributing television shows and movies, Disney + is part of a much larger ecosystem,
“By controlling distribution of its content and going direct-to-consumer, Disney can deepen its already strong connections with customers in a way that benefits all parts of the business: movies can beget original content on Disney+ which begets new attractions at theme parks which begets merchandising opportunities which begets new movies, all building on each other like a cinematic universe in real life. Indeed, it is a testament to just how lucrative the traditional TV model is that it took so long for Disney to shift to this approach.”
The discussion highlights the impressive breadth of Disney’s business and the envious number of intellectual properties – the rights to all the Marvel superheroes is just one example – the company owns. The author also provides a number of interesting related observations, including his belief that cable television as we know it now will eventually consist entirely of live sports and news.
The success of Disney + will be interesting on a number of fronts. For example, in my column “The bear market in nostalgia” I wrote about how in the era of remote devices, cultural influences from older generations may not be handed down to the next. I’ll be interested to see if Snow White can still be monetized in the internet era.
-- Scott Barlow, Globe and Mail market strategist
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Stocks to ponder
Alimentation Couche-Tard Inc. (ATD-B-T). Gas-station convenience stores are hot properties under the ownership of Alimentation Couche-Tard Inc. But how long can the company keep this winning streak going? The stock has been hitting record highs this year, following a rally of more than 50 per cent since last May. The gains are giving a glamorous sheen to a business model based on, well, convenience: Visits average just three to four minutes and most merchandise is consumed within an hour of purchase, raising questions about the importance of brand as Couche-Tard expands its empire of Circle K stores. Yet there is no denying the success here, which is driving global recognition of the company based in Laval, Que. David Berman takes a look (for subscribers).
Parex Resources Inc. (PXT-T). This stock appears on the positive breakouts list (stocks with positive price momentum). The share price has rallied 34 per cent year-to-date with a further gain of 37 per cent anticipated. It has 10 recent buy recommendations. Calgary-based Parex Resources is an oil-weighted company with operations focused in Colombia where it holds interests in exploration and production blocks. Jennifer Dowty reports (for subscribers).
Village Farms International Inc. (VFF-T). Noted U.S. short-seller Andrew Left took aim at B.C. grower Village Farms International Inc., sending the company’s stock down nearly 11 per cent Tuesday, although it regained some losses Wednesday. Mr. Left, of Citron Research, said that cannabis investors have better choices than the vegetable-growing company, the shares of which had more than quadrupled this year on the strength of a joint venture to grow marijuana in its greenhouses in Delta, B.C. Village Farms, which has posted nearly US$750-million in sales over the past five years, has been slightly less than break-even, profit-wise, over that time. Yet, the cannabis connection helped Village Farms hit $1.1-billion in market capitalization late last month, not long after its listing on the U.S. Nasdaq exchange.
The Rundown
Why Canadian banks aren’t the only game in town
Many Canadian investors hold a couple of truths to be self-evident. One is that big banks rule. The other is that only stocks with big dividend yields deserve to be considered as potential investments. Ian McGugan looks at a few charts that demonstrate both bedrock beliefs deserve to be questioned. Two sectors on the TSX have done better over the past 20 years than financial stocks. (For subscribers).
How this actively managed Canadian dividend ETF has been outperforming its competitors
Computers can win at chess, control driverless cars and predict the weather. But can they pick great dividend stocks? Srikanth Iyer is convinced they can. Mr. Iyer is the lead portfolio manager for the Horizons Active Canadian Dividend ETF (HAL), whose five-year annualized total return of 6.8 per cent (through Feb. 28) was tops in The Globe and Mail’s recent survey of Canadian dividend exchange-traded funds. It also beat the annualized total return of 5.5 per cent for the S&P/TSX Composite Index over the same period. What makes HAL different? While most ETFs passively track an index, HAL employs an active approach that relies on sophisticated computer models to choose stocks to buy and sell. John Heinzl explains (for subscribers).
Balanced ETFs are a genuine hit with investors, and rightfully so
The most influential exchange-traded fund (ETF) product of the past year or so has nothing to do with cannabis, artificial intelligence, liquid alts or any other trends of the day. Balanced ETFs – diversified portfolios packaged into a single fund – are much more of a foundation for the future success of the ETF business. The original products in this category, the Vanguard Conservative ETF Portfolio (VCNS), Balanced ETF Portfolio (VBAL) and Growth ETF Portfolio (VGRO), were listed for trading on the TSX in late January 2018. Rob Carrick take a look at four things we’ve learned about them in the past year (for subscribers).
Also read: ETF Buyer’s Guide 2019: The complete series
How investors could profit from consumers’ hunger for meat alternatives
Investors will soon have more options to play the plant-based protein food trend as a growing number of companies incorporate the meat alternative into their operations. El Segundo, Calif.-based Beyond Meat Inc., which makes “plant-based meats” sold in stores and restaurants, is poised to go public in the coming weeks, while companies such as Burger King and Maple Leaf Foods Inc. are investing more heavily into the sector. Brenda Bouw reports (for subscribers).
Ontario to tighten rules for financial planner, adviser credentials
The government of Ontario is proposing stricter regulations for financial planners and financial advisers by cracking down on individuals who are not qualified to use those titles. In its recent budget, the province announced the Financial Professionals Title Protection Act, 2019, to improve oversight on qualifications. The bill would require anyone in Ontario who wants to use to use the title “financial planner” or “financial adviser” to obtain appropriate credentials and remain in good standing. Financial advisers typically help clients manage their investments, while financial planners help clients prepare plans to meet a goal such as retirement or a child’s education. Clare O’Hara reports (for subscribers).
Others (for subscribers)
Canadian money managers move to REITs and utilities, away from banks and energy: Survey
Merrill Lynch trade idea: Sell utilities, buy financials
Bridgewater warns of peak U.S. profit margins, lower stock prices
BlackRock’s Fink expects ‘huge’ rush into underinvested stock market
Wednesday’s Insider Report: Management executive tops up his holdings in this bank stock
Wednesday’s analyst upgrades and downgrades
Wednesday’s small-cap stocks to watch
Tuesday’s Insider Report: CEO and CFO are buying this spiking stock yielding 4.9%
Tuesday’s analyst upgrades and downgrades
Others (for everyone)
AI-assisted stock trading venue plans to use the technology for bigger trades
Rio Tinto warning may rupture mining industry into green and dirty
Globe Advisor
When mutual funds make more sense than ETFs
Hurdles remain for mutual fund-licensed advisors who want to sell ETFs
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Ask Globe Investor
Question: Do you have any plans to start a U.S. model dividend portfolio similar to your Canadian-focused model Yield Hog Dividend Growth Portfolio?
Answer: No. Because there are so many great U.S. dividend stocks, and because U.S. dividend ETFs have very low costs, I prefer to keep things simple and get my U.S. dividend exposure – both personally and in my model dividend portfolio – from the iShares Core Dividend Growth ETF (DGRO). It holds nearly 500 U.S. stocks and has a management expense ratio of just 0.08 per cent. (View my model dividend portfolio here.)
--John Heinzl
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What’s up in the days ahead
Merrill Lynch thinks there are profits to be made right now in shorting U.S. utility stocks and buying financials. But would such a strategy work in Canada? Scott Barlow will have the answer.
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Compiled by Gillian Livingston
Scott Barlow