It’s truly possible to invest a small amount of money in the stock market and see it grow into a large sum. That’s one reason why stocks are a great wealth-building tool. Investing small amounts across several stocks increases your chances of hitting a home run.
Activision Blizzard owns some of the most popular franchises in the interactive entertainment industry, including Call of Duty, the mobile game Candy Crush, World of Warcraft, Hearthstone, Overwatch, and Diablo. Strong player engagement in these titles has Activision Blizzard on track to generate a record $7.6 billion in net bookings this year.
However, Activision wasn’t always focused on just a handful of games. It used to publish dozens of products in the video game industry across a range of genres, such as action sports, superheroes, racing, and other types of games that appeal to a mass market. But through acquisitions and internal development, Activision Blizzard gradually shifted to investing more resources to the biggest and most profitable franchises, which is where it is today.
CEO Bobby Kotick has been instrumental in the company’s growth. Since 1991, when Kotick took over as CEO, a $1,000 investment in the stock has turned into $85,000. With dividends reinvested, the investment would be worth $95,000. Even if you had waited until 2009 to invest $1,000, your investment would already be worth $7,200, which is a great return over 11 years.
Once again, Kotick is adapting Activision Blizzard to the current times by doubling down on mobile games and esports. Over the last decade, the company launched two professional esports leagues, Overwatch League and Call of Duty League, and also acquired leading mobile game-maker King Digital Entertainment for $5.9 billion. Mobile and esports are the two fastest-growing markets in the industry.
Last year’s launch of Call of Duty Mobile was downloaded more than 150 million times, contributing to a 30% increase in monthly active users in the second quarter. The company’s next big mobile release is anticipated to be Diablo Immortal, as management continues to reimagine its biggest franchises on console and PC for a mobile audience.
Activision Blizzard’s performance is derived from owning top franchises in a growing $150 billion video game industry. The stock has even outperformed its peers, Electronic Arts and Take-Two Interactive, over the last 20 years as a result of deft capital allocation moves by management. The company’s popular franchises and skilled leadership should continue to serve shareholders well.
Nike has benefited from similar strengths as Activision Blizzard, such as its top consumer brand and the tailwind of growth in the athletic-apparel industry. In recent years, Nike has continued to deliver returns to shareholders through relying on its creative skills to drive demand for its classic sneaker models, including Air Force 1 and Air Max, with an endless variety of colorways and collaborations with designer brands.
It’s a testament to Nike’s brand power that its classic sneaker styles are still top sellers. The Air Force 1 debuted in 1982, but in the first half of 2020, the Nike Air Force 1 Low was the top-selling sneaker in the industry. Nike dominated with nine different shoes on NPD Group’s top 10 best-selling footwear chart.
A $1,000 investment in Nike at the end of 1990 would be worth over $140,000 today with dividends reinvested. Even if you had waited until 2005 to invest, a small sum would have turned into $14,000 with dividend reinvestment.
Nike plans to continue delivering results for investors through its consumer direct-acceleration strategy. At the heart of this effort is to create a digital shopping experience that connects consumers to the brand through membership and personalization, which should lead to a loyal customer base.
Nike is seeing high demand through its e-commerce channels. Digital customers have a higher lifetime value to Nike and also contribute to higher profit margins. Nike’s e-commerce sales contributed to 30% of total revenue in the most recent quarter, and management sees that percentage reaching half of total revenue over time.
Nike generated $37 billion in revenue over the last four quarters, but management continues to see opportunities to expand in major cities around the world. A new digitally enabled store concept that recently opened in China’s third largest city, Guangzhou, has led to higher member checkout rates than the rest of Nike’s store footprint.
As management continues to invest in the digital ecosystem, including new store experiences, Nike should continue to outperform the broader retail industry and deliver market-beating returns to investors.