Support from a new activist firm may be what Disney needs to accelerate CEO Iger's turnaround

Published Wed, Nov 15 20234:40 PM EST

We're pleased to see a new activist firm come to Disney 's (DIS) support since CEO Bob Iger's turnaround strategy for the entertainment giant has been taking time to show meaningful results. ValueAct has been buying up Disney shares and continues to grow its position in the iconic entertainment giant, according to a Wednesday report from Ken Squire , portfolio manager of 13D Activist Fund. ValueAct started to build its Disney stake this past summer, and the stock is now among its largest positions. Disney shares on Wednesday rose more than 3% to close at nearly $94 each — adding to the recent gains since the stock's 52-week low of $78.73 on Oct. 4. DIS YTD mountain DIS stock performance year-to-date. ValueAct, led by CEO Mason Morfit, has been talking with Disney management and is said to be in support of Iger's current action plan, which includes deeper cost cuts and a profitable streaming business by 2024. According to Squire, ValueAct believes Disney's theme parks and consumer products businesses alone are worth in the low $80s per share due to their high return on capital and their intellectual property strength. Earlier this year, ValueAct was one of several activists in fellow Club holding Salesforce (CRM) and the only one to get a board seat at the software company in January. ValueAct isn't the only activist firm that has built a stake in Disney. Nelson Peltz's Trian Fund Management increased its stake in Disney as of Sept. 30, according to a recent SEC filing. This new Disney buy during the third quarter comes after Peltz's recent push in October to potentially reignite a fight for multiple seats on Disney's board. "I don't think Nelson Peltz is done trying to stir the pot and bring in some much-needed challenge to the board room, which it should have," Jim Cramer said during November's Monthly Meeting Wednesday. Back in February, Peltz ended his first proxy battle in a live interview on CNBC with Jim Cramer after Iger laid out a plan to cut costs, lay off workers, reorganize the company, and ask the board to reinstate the dividend. Bottom line We're bullish on Disney's streaming model — now that it announced plans to buy the rest of Hulu, which will add more advertising revenue. A combined Hulu and Disney+ offering could look similar to competitor Netflix (NFLX). Moreover, the company's healthy balance sheet and ability to generate strong cash flow give it the potential to offer a dividend by year-end and even a stock buyback in the years ahead. Not to mention, it's notable that management is getting a better hold on financials by taking out additional costs to achieve $7.5 billion in cost reductions. Even though it may take some time, we continue to believe that Disney's turnaround story will lead to long-term growth for the company. (Jim Cramer's Charitable Trust is long DIS, CRM. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A sign near an entranceway to Walt Disney World on MAY 22, 2023 in Orlando, Florida.

Joe Raedle | Getty Images

We're pleased to see a new activist firm come to Disney's (DIS) support since CEO Bob Iger's turnaround strategy for the entertainment giant has been taking time to show meaningful results.