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Why Disney Is Still a Stock to Own for the Next Decade After CFO Departure

There are two things that investors hate to see in companies that have enjoyed solid returns or that have done well in the market. One is the announcement by the company that the chief executive officer (CEO) is leaving the company. The second, and sometimes even more of a flag to the investment community, is when a chief financial officer (CFO) departs. Walt Disney Co. (NYSE: DIS) announced that James A. Rasulo will step down as CFO of the company with an effective date of June 30, 2015.

Disney was recent reincluded on our list of 10 stocks to own for the next decade. The list was first issued in 2010, and Disney shares have risen by about 200% since then. The first thought that came to mind is that this is a fast CFO departure for a company the size of Disney.

So, is this something investors should worry about? On first glance, maybe. After looking deeper into this matter, existing and new Disney investors should still consider themselves in great shape.

The concern was that Disney’s press release said that a new CFO will be named at a later date. Rasulo joined Disney in 1986 as director of strategic planning and development. If you want to look at the real issue at hand, Iger has set the company up for a replacement already. It is almost never a shock to see other managers leave when they do not get the top post in CEO replacement.

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As far as why Disney shareholders should not worry, the answer is not a single issue. It is that everything keeps working here. The media and entertainment giant has way beyond an extensive movie library. It now has studios and Marvel, Pixar and Star Wars all under one roof. “Frozen” was the latest new series hit at the box office, and a coming sequel is going to allow “Frozen” merchandise to keep pressuring other toy lines from competitors.

Then there is the massive reach of Disney via merchandising, theme parks, vacation destinations, cruises, ESPN and ABC. These have been and will be game-changing winners for Iger and his endless successes, and now it seems that even Hulu is becoming a winner after almost getting put out for a fire sale.

Back in 2010, Disney had not even recovered above its all-time highs from the late 1990s. Its yield has remained somewhat low from the dividend, but even after tripling up on that, it looks low now, due to that 200% price gain.

The reality is that Disney quite simply has surpassed all expectations. It has had model earnings, and analysts keep chasing this higher and higher. Even at 20 times the blended 2015/2016 earnings to buy Disney now, investors still want a piece of the Mouse House, or any other nickname you want to assign to Disney.

If shareholders really were concerned about the CFO’s departure, the stock would be lower on the news. Instead, shares were up another 0.9% at $111.34 in Monday’s afternoon trading. That is just $2 shy of an all-time high.

CEO Iger said of Rasulo:

Jay has been a valued colleague and friend, as well as a vital contributor to Disney’s success, particularly in his roles as chief financial officer and chairman of our Parks and Resorts division. I look forward to working with him in this new advisory role, where his strategic acumen and savvy insight will continue to benefit the company.

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Rasulo himself said:

It has been a true honor to work at Disney for these many years, and for a great leader in Bob Iger. And as I look to the horizon for future endeavors, I am privileged to continue my friendship with Bob and remain as an advisor to him and the Disney team.

As far as the logic behind worrying about a CFO departure more than a CEO departure, CFOs know where all the skeletons are buried — a saying about those who understand the details in and out in the balance sheet. Some investors might worry at other companies, but there just does not seem to be any reason to worry here.

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