Shannon Zimmerman: The last time we spoke, we talked a little bit about Disney, and you were thinking about Disney during a period when theme-park attendance was sort of on the decline. Talk a little bit about that, your area of focus, and what made you feel good about purchasing shares even when the theme-park attendance wasn’t what Wall Street wanted to be.
Bill Nygren: A situation we like is when we think investors are applying the 80-20 rule inaccurately; 80% of their attention is on 20% of the business value. And that was a situation that we saw at Disney where theme park attendance had been down a little bit, and almost everything that was written about the company was about the outlook for theme parks and how that was likely to change over upcoming years.
When we looked at business value, the cable networks that the company owned--ESPN and the Disney Channel along with some other lesser networks--we thought they were at least 80% of the value of the company. We believe the price we were paying was less than the cable networks alone, and with that focus we didn’t have to spend that much time worrying about whether next year’s traffic at the theme parks was going to be up or down a little bit.
Zimmerman: What accounts for the mind-set, the sort of heard thing, that gets people focused on the wrong part of a company’s business?
Nygren: I think investors tend to be very news-flow-oriented, and when a company is announcing theme-park attendance at regular intervals, it gives analysts a metric to look at and care about.
Nygren: And despite ESPN churning out double-digit increases year after year after year, it just never really grabbed analysts' focus the way theme park attendance did.