The Walt Disney Company (DIS) is one of the best performers in the Dow Jones Industrial Average lately.
Thanks to the shrewd purchase of Marvel in 2012, DIS stock has been riding high on superhero movies like The Avengers, and thanks to its mega-hit Frozen, Walt Disney has once again proven it is a force with kids — and, of course, the grandparents that buy them stuff.
Just check out the returns for DIS stock since the Great Recession:
- Disney stock since August 2009: Up 240% vs. 80% for the Dow
- Disney stock since August 2011: Up 178% vs. 55% for the Dow
- Disney stock since August 2013: Up 37% vs. 8% for the Dow
But for investors riding high on Disney right now, things aren’t all smooth sailing. In fact, there’s one threat that looms above all others — and that’s the risk of China’s richest man creating a Disney-like empire of his own in this fast-growing entertainment market.
Disney vs. Wanda in China
Wanda Group is China’s biggest real estate company, owning profitable shopping malls in many of the busiest Chinese cities. As a result of theaters in these shopping malls and its 2012 acquisition of U.S. chain AMC Entertainment (AMC), Wanda also is the world’s largest cinema chain.
That alone gives Disney something to worry about, considering the gatekeeper function this theater giant holds.
Furthermore, Wanda’s founder Wang Jianlin is China’s richest man — and did not get to his station by resting on his laurels. Under his direction, Wanda is considering the construction of about 200 theme parks in mainland China by the year 2020.
This clearly is a shot at Disney, which itself is opening a mainland China theme park next year in Shanghai to supplement the brisk business done by its resort in Hong Kong.
DIS Stock to Face a Home-Turf Challenge?
The untapped potential of the Chinese entertainment market is huge, and continues to attract big interest from Western brands. Consider that this March, DreamWorks Animation (DWA) also announced plans for a big entertainment park in China that will open by 2017.
But it’s important to know that Wanda isn’t just focused on China.
Recently, Wanda purchased a $1.2 billion studio in Beverly Hills. And what with Rupert Murdoch and News Corp (NWSA) stepping back from their planned buyout of Time Warner Inc. (TWX), there are rumors that Wang Jianlin and Wanda will step into that void and bring their big brand to the West.
The biggest question in entertainment has long been whether a smash-hit can span the dual markets of the U.S. and China with equal success.
Disney’s future depends on it figuring out this unique approach to global entertainment, and DIS stock has already run up big on expectations that its growth will continue in the years ahead.
If Wanda Group starts to give DIS a run for its money, however, there could be serious fireworks — and finally a serious challenge to the global entertainment powerhouse that is Disney.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
