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Disney Starting to Muster Up Its Magic


The release of Alice in Wonderland is just a small piece of the profit puzzle.

What an awesome weekend. With the exception of a bike ride and taking in my daughter's soccer game, I did absolutely nothing and loved every second of it.

Asian stocks started off the week on an up note. The Hang Seng and the Nikkei rose 1.97% and 2.09% respectively. European stocks advanced in early trading too. And here in the US we are currently trading higher.

Here's what I'm focused on this fine Monday morning:

Walt Disney Co (DIS)
There's bound to be a lot of chatter this morning about how well Alice in Wonderland did in theaters this past weekend. And I suspect that the Disney shares may get a bit of a goose given the strong results.

Some quick thoughts:

1. While the movie has apparently done very well in its opening weekend, and will probably continue to draw in big bucks in the coming weeks, I don't think that, by itself, is a reason to belly up to the shares.

2. In my mind the Disney story is much bigger than this one film. In a nutshell, with the economy clawing its way back, I think this is a good way to play: what should be a bounce back in overall theme park attendance, an improving advertising environment (which should goose results in its broadcasting biz), and a rebound in consumer spending (which should mean more folks in movie theater seats and greater merchandise sales). Again, I'm focused on all of these as opposed to the success of one movie.

3. All that said, if the stock can keep making new highs, I expect it to remain on a lot of radar screens and think that interest in the shares could perk up from here as momentum players and Johnny-come-latelies climb aboard.

McDonald's (MCD)
Mickey D's was out with its February comps bright and early this morning. The scoop is that its global comps were up 4.8%.

Some thoughts:

1. Given the environment and how badly many folks are struggling, that's a good result. I'd also remind you that in the comparable period last year it generated a (positive) comp of 1.4% so it wasn't going up against an easy comparison.

2. No matter how bad this economy gets, kids don't realize it, and it certainly remains a favorite destination for the younger generation. Just ask my kids, who can't go for more than two weeks without begging me to run through the drive-thru for a Happy Meal.

3. The company has pretty consistently been taking out the earnings estimates and I think that trend will continue here in 2010 and potentially beyond. Also, when compared to its fast-food counterparts it remains the best pick in my opinion.

Research In Motion (RIMM)
Minyan Justin Sharon kindly points out this morning that BMO Capital Markets upped its rating on the stock to Outperform.

My two cents:

I was definitely not a big cheerleader when these guys were trading in the upper $80s, but in the mid $60s I became a lot more 'jazz hands'. Long story short, nothing has changed on that front. At just 13.7 times next year's estimate and a swell history of exceeding Street estimates I continue to see upside potential.

Perhaps not surprisingly, I think the upgrade will put the stock on a lot of radar screens early on in the session and the shares should be trading in the green.

Palm (PALM)
The skinny is that Macquarie downgraded these guys to Underperform.

My thoughts:

Yeah I know I haven't been the company's biggest proponent. But with everyone continuing to pile on I have to say that my ears are perking up in a big way. Would I punch this ticket now? Nah, I think the downgrade could have a negative impact in the days ahead as some brokers are likely to reposition their clients out of the stock. But again my eyes are peeled because I smell a potential opportunity here, maybe later in the year.

Have a great day!
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No positions in stocks mentioned.

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