President Jimmy Carter once famously said: "Well, as you know, there are many things in life that are not fair, that wealthy people can afford and poor people can't."
That's true in life, but in the stock market?
Not so clear.
In the last 24 hours two of the best-and wealthiest-companies on Earth, the Walt Disney Company (DIS) and Walmart (WMT) are getting panned for making bold investments in their businesses. Disney is spending to build out its tech offerings that will produce over the top and on-line offerings. As Christine Mary McCarthy, senior executive vice president and CFOr, said on the conference call, "the operating loss of BAMTech for the second quarter reflects ongoing investment in its technology platform including costs associated with ESPN Plus, which is the offering that will be able to monetize much more programming than ESPN can now."
That spend, plus the obvious attempt to purchase Fox, something that Comcast (CMCSA) might disrupt with a higher bid, are obscuring a remarkable quarter filled with great theme park numbers and outstanding movie numbers. As CEO Bob Iger said on the call about "Black Panther" and "Avengers: Infinity War," "our studio has delivered 9 of the top ten biggest domestic box office offerings of all time, all of them released in the last six years." So often you hear movie companies talk about how they have hit machines. But they are often hit or miss and episodic in narrative. Not Disney. These are franchises no different than each iteration of Apple (AAPL) I-Phones. It's extraordinary. And no one cares. The stock's getting hammered for investing in the future.
Meanwhile, Walmart shells out $16 billion for 77% of Flipkart, giving them an incredible e-commerce platform in India, one that is number one in fashion, number one in large appliances and number two in electronics. I understand that Amazon (AMZN) tried to buy this stake for $2 billion more than Walmart paid but the two founders, Binny and Sachin Bansal - not related - who happened to have worked at Amazon, threw it to Walmart.
Like Disney's stock, Walmart's is getting whacked because it is investing in the future.
Which brings me to the twist on the second part of Carter's dictum: poor people CAN afford to buy things that the rich can't and it is unfair. I wonder if Amazon had won Flipkart how much Amazon's stock would have been up, not down. I bet it would be substantial because Amazon is given a free pass to spend as much as it wants. Unlike Walmart, no one is holding Amazon to a profit standard, just a growth standard.
You know who else gets the free pass? Netflix (NFLX) and Tesla (TSLA) . Reed Hastings actually boasts on his Netflix conference calls how he needs to spend aggressively, spend much more than he can afford right now, in order to stay ahead and continue to grow worldwide. It's incredible how much of a pass he gets. But not nearly as much as Elon Musk gets. He's losing fortunes per car but if he can just make a lot of cars, as many as he promises, investors will throw money at him even as he has repeatedly missed his targets.
Walmart and Disney, trapped by the spreadsheets, and the need to beat earnings estimates. Tesla, Netflix and Amazon, measured by growth, with no limit to how much they can spend.
Yep, the stock market is unfair, it's just not unfair the way it should be. Too bad because Walmart and Disney are all the richer for the investments they make. Just don't tell it to the sellers. They don't want to hear it.
(For more on Disney, see Disney Continues to Struggle on the Charts)