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Author: instride Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 49696  
Subject: Re: CNBC's America Now Date: 1/13/2002 1:42 PM
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Recommendations: 14
Clutch,

I usually lurk here as Disney is one of many companies on my watch list to buy.

It is true as another poster said that debt is not always a bad thing. If the interest payments are less than the increase in earnings, that is a good thing. You have used borrowed money to make money. If, on the other hand, your interest payments outpace the earnings. The earnings amounts I usally hear are are a type of pro-forma earnings that excludes interest and few other goodies. Their earnings under Generally Accepted Accounting Priniples are -.02 per share. There are more losses to appear on the books according to recent news. However, it is anyone's guess as to what the number will be and when things will really turn around. The one thing debt will always be, is increased risk to the company and share holders.

I do take issue with an unsubstantiated statement by a previous poster that Disney is undervalued. Using Discounted Cash Flow Analysis, assuming an excess return of 5 yrs, a net operating margin of 13%, a depreciation rate of 5.5, a weighted average cost of capital of 7.5%, and a projected revenue growth rate of 7.5%, the intrinsic value of a share of Disney stock is 11.25. I even assumed a low risk premium because of Disney's great brand name and overall past "track record." Okay, let's use the poster's hopefull 15% revenue growth rate. The intrinsic share value would be 16.25.

Warren Buffett believes the best long term gains are enhanced by minimizing big losses. Take it from me. I learned the hard way on JDSU, myself. I suggest that you wait patiently to buy till the stock hits a price that you feel satisfies your margin of safety. A price where the numbers justify the long term returns and you can psychologically and financially (no margin buying) handle any further dowturns. If you bought this fall and are up, I would sell for a short term capital gain to offset some of your recent losses. You can always buy back into DIS in the future, more than likely, at a better price. If the scenario does not go as planned, "there are other fish in the sea." Though, I doubt the Disney train "will leave the station without you." From your previous posts, I know you get emotionally attached to your holdings. However, a stock is not a person or a pet. It does not love you back. It won't care if you leave it and come back at a future time.

Whatever you do, carefully think it out and make a ration decision.

Instride

Patience is a virtue worthy of good investors.
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