Investors have made nice profits over the past five years. Since September 2016 the S&P 500 Index is up 106%, but it’s certainly been a bumpy ride.
There have been two notable drops in the market in the past five years. At the end of 2018, the S&P 500 lost 14.3% in the fourth quarter. The March 2020 crash at the start of the pandemic was pretty scary as the index lost a quarter of its value in just three weeks.
There’s nothing wrong with buying stocks when they hit new highs, but investors who bought during these two downturns have benefited amply.
Consumer love for entertainment will never go away, which is what makes the best video game maker Activision Blizzard (NASDAQ: ATVI) and Walt Disney (NYSE: DIS) particularly attractive investments right now. Both stocks have outperformed the broader market this year, but that probably won’t last.
The growth in interactive entertainment has given this top game maker tremendous tailwind. A $ 10,000 investment in 2011 would be worth $ 68,000 now, and the next decade could be just as rewarding.
In the short term, market participants are concerned about a slowdown in growth as the surge in player engagement fades during the pandemic. After a 32% increase in bookings in 2020, Activision expects bookings to only increase 2.7% in 2021. The stock is currently about 25% below its 52-week high.
In addition to slowing short-term growth, Activision has faced a civil law suit from regulators for alleged discrimination and harassment of female employees, but the recent sell-off seems more in line with the negative sentiment in the video game industry as a whole. It’s worth noting that shares of Take-Two Interactive and Nintendo are also down while this year Electronic Arts is roughly flat.
The recent slump is a great opportunity to buy a top video game stock ahead of several big releases over the next several years. Overwatch 2 and Diablo 4 Given the popularity of these franchises, it should sell millions of copies after publication. The company has already led call of Duty a major turnaround, with the franchise grossing $ 3 billion in bookings in 2020 alone. Management wants to do the same with the other gaming brands that currently entertain 408 million players every month. Additionally, Activision pays a dividend while you wait, with a current dividend yield of 0.6%.
Disney’s share price rose 25% in late 2020, despite the fact that its theme parks, which make up half of its business, have largely closed because of the pandemic. Disney’s Parks, Experiences and Products segment just reported its first quarterly profit since the pandemic began. With the stock currently down 9% below its 52-week high, this is a good time to start thinking about buying stocks before the Parks segment fully rebounds and continues to push the stock higher.
Demand in the theme parks is gradually returning, and management recently made some changes that could improve traffic and guest satisfaction, and potentially increase profits in the long run. Disney Genie + is a new digital service that cuts waiting times and makes planning a day at Disney World a lot easier. It’s good for shareholders too, as Disney charges additional fees for this service.
Meanwhile, Disney +, Hulu, and ESPN + are growing rapidly, reaching nearly 174 million subscribers in the last quarter. Disney + ended the quarter with 116 million subscribers, more than double the 57 million a year earlier. It will certainly continue to grow as Disney + has not yet been launched in many countries, including Thailand, South Korea, Taiwan, Hong Kong, and Eastern Europe.
Before Disney began increasing its investment in content prior to the launch of Disney +, earnings per share peaked at $ 8.36 for fiscal 2018. At a current share price of $ 186, the stock is selling for 22 times its previous earnings watermark, which is a fair price for this top entertainment stock with a bright future in streaming.
This article represents the opinion of the author who may disagree with the “official” referral position of a premium advisory service from the Motley Fool. We are colorful! Questioning an investment thesis – even one of our own – helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.Source link