As cable subscriber counts have dwindled in recent years, many analysts have been focused on the effect upon ESPN and its parent entity The Walt Disney Company (DIS). The reason for this is because the monthly channel cost for ESPN dwarfs everything else in the cable field. ESPN charges its cable distributors $7.21 per month for each subscriber, whereas Fox Sports 1 only charges $1.10. Fox Sports 1 can lose a bit over six subscribers in order for the shareholders of 21st Century Fox to sustain the same absolute dollar loss that Disney shareholders experience when just one ESPN subscriber is lost.
I have a special fondness for York Water (YORW) stock because it has been paying out dividends uninterrupted since 1916. If you can keep sending cash to your owners during General Sherman’s March to the Sea, the Battle of Somme, the Battle of Guadalcanal, and all through to the post-war tech revolution, you deserve commendation for exceeding expectations that are nearly unmatched in the field of business.
But just because I love a corporation’s history does not mean that I can ignore the role price plays in determining whether or not a stock is a good investment at a particular point in time.
In 2015, Anheuser-Busch stock hit a high of $130. This year, Anheuser-Busch hit a high of $136. The valuation of the stock was between 25x and 27x earnings, which made no sense to me given that the core brands were either stagnating or in decline (for example, Bud Light in 2016 ships out 10% less than it did in 2008). Even with 3G management taking aggressive action to raise the profit margin from 8% to 18%, the lack of organic sales growth meant that Anheuser-Busch didn’t deserve the type of premium you might pay for Visa, Alphabet, or Nike.