Adapting… A Great Strength Of The Human Race; Too Bad Many Investment “Professionals” Miss This Fact
Last night The Walt Disney Company (DIS) reported their latest quarterly earnings followed by the customary earnings call with analysts. Needless to say, there was a lack of earnings followed by a lack of future guidance. When you are an entertainment conglomerate and are no longer allowed to provide the majority of your entertainment… this really is not newsworthy. In fact, the entire earnings season has not been newsworthy. My ten-year old son can tell you that if a company closes its doors, their business is going to suffer. And, if you have no idea when you are going to be allowed to re-open (or how you will re-open) you cannot provide any future guidance! Duh!
But, if you listen to the investment folks on the squawk box you would think not providing future guidance is a death knell. I’ve said this before, but I’ll say it again… it makes you wonder if these analysts can look further out than six months. This is still a wonderment, but the questions surrounding DIS future made my wonderment wander even further… Do analysts know history? Not just stock market history, but the history of the human race?
Well, let me be the bearer of good news… We will adapt! Our behaviors will change in order to better our lives. How can I be so certain? We’ve done it before (and I am sure we will have to do it again). Nearly two decades ago saw the 9/11 tragedy that changed how we live today. Do you even remember when you were allowed to walk into a stadium/arena without going thru a security checkpoint? Or have your friends/family meet you at your arrival gate in the airport? Neither do I… but back then there were plenty of people complaining and concerned about Homeland Security measures. Guess what, we all adapted.
In the coming weeks/months in order to go out, we will be asked to social distance, wear a mask, etc. in an effort to contain this virus. At the outset, businesses will re-open at less than capacity and may want to take your temperature. And this may be only in the short-term (until a vaccine is available). Is this the end of the world?
As for the stock market, the chart to the right is the Dow Jones Index from September 8, 2001 through April 30, 2020. The total return during this period is over 160% (8%+ annually). Note, this includes the 14%+ drop due to the 9/11 attacks as well as the recent meltdown in March.
There has been other major stock market events since September 11, 2001, but this long-term chart shows businesses and people have made the necessary adjustments to prosper in a post 9/11 world. My sense is, we will adjust and prosper after this crisis as well. It’s ingrained in us.
By the way, if you were concerned/curious about The Mouse House… their stock price was $25 prior to 9/11 and closed at $108 a share on April 30th. This is a total return of 300%+. Looks like The Walt Disney Company adapted and prospered over the past two decades. I wouldn’t bet against them now or any great American companies.
Note: Nothing contained herein this letter should be considered to be investment advice, research or an invitation to buy or sell any securities.