In a very tough year for media stocks, Disney (DIS) has been a standout performer. At recent highs, the shares were up over 20% for the year, more than twice the gain in the S&P 500. DIS was a victim of its own success after reporting its latest quarterly earnings. The results were slightly above expectations but not as big a surprise as the last few quarters. The company also reminded investors that higher sports rights costs at ESPN would slow earnings growth in the cable network segment in 2015 before it accelerates again in 2016. These two factors plus higher corporate wide pension costs and lack of detailed clarity on the company’s share buyback plans in 2016 led to a 2% decline in DIS shares following its latest earnings report.

I believe the recent pullback will prove temporary as ESPN growth is locked in over the next several years as sports rights costs are known and higher affiliate fees paid by cable and satellite companies to cover the added expense have already been negotiated. In addition, sports should continue to prove attractive to advertisers and not vulnerable to loss of advertising dollars to online video.

More importantly, DIS is an incredible roll with its films. Frozen drove much of the upside to earnings expectations over the past year. Guardians of the Galaxy far outperformed expectations and is now another franchise. The next year plus brings another Avengers film, the first Pixar film in two years, the first of the new Star Wars films, and the just opened hit Big Hero Six. In its recent history, DIS earnings and shares have outperformed expectations when the content is humming as the company has incomparable synergies throughout its operating divisions including TV networks, theme parks, consumer products, and video games. Growth will get a further boost in 2017 with the opening of Shanghai Disneyland. DIS shares trade at well deserved premium to the market and peers but remain an excellent core holding with upside of 15-20% over the next year. Showing patience against any of the temporary issues mentioned should prove rewarding.

DIS is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor. Northlake’s regulatory filings can be found at www.sec.gov. DIS is a net long position in the Entermedia Funds. Steve is portfolio manager and managing partner of Entermedia, long/short equity hedge funds focused on media, entertainment, leisure, communications, and related technologies.