Few businesses have more effectively generated shareholder value over the years than The Walt Disney Company (NYSE:DIS). Investors who bought Disney stock a mere five years ago have watched their money more than double, including dividends. And those who purchased 10 years ago have enjoyed a total return of more than 230%, crushing the S&P 500's respectable 110% gain over the same period.
But as impressive as Disney's gains have been -- especially as it continues to grow from a relatively large base -- a small handful of stocks have managed to easily outpace the House of Mouse lately.
To that end -- and with all due respect to the entertainment juggernaut -- we asked three top Motley Fool investors to each discuss a stock that has put Walt Disney's returns to shame in recent years. Read on to learn why they chose NVIDIA (NASDAQ:NVDA), Netflix (NASDAQ:NFLX), and AbbVie (NYSE:ABBV), and -- perhaps more interesting -- whether they believe these companies will continue to outperform.
Accelerating growth -- and only just getting started
Steve Symington (NVIDIA): After years of investing billions of dollars toward fostering multiple high-growth opportunities for its cutting-edge graphics chip technology, the acceleration of NVIDIA Corporation's business truly began to shock the market when its fiscal third-quarter report last year absolutely crushed expectations. And NVIDIA shows no signs of slowing down anytime soon; revenue in its most recent quarter skyrocketed 56% year over year to $2.2 billion, while net income climbed 123% to $583 million. Both were well ahead of NVIDIA's latest financial guidance.
The market didn't seem particularly impressed with those results a few weeks ago, however, partly because NVIDIA's stock price has climbed more than 1,100% over the past five years, including a 160%-plus gain in the past year alone.
But I also won't be the least bit surprised if NVIDIA extends its upward trajectory in the years ahead, with particular thanks to the central role its processors play enabling a growing number of applications for machine learning and artificial intelligence (AI).
"Nearly every industry and company is awakening to the power of AI," teased NVIDIA founder and CEO Jensen Huang last month. "This is the era of AI, and the NVIDIA GPU has become its brain."
Huang noted that NVIDIA only just began shipping its new Volta GPU in volume to its leading AI customers last quarter. Considering Volta offers a hundredfold increase in performance for deep learning applications over the company's best chip only four years ago, I can't wait to see how NVIDIA and its customers harness that power to change our world for the better. And I think long-term investors who open or add to their positions even after NVIDIA's astronomical rise will be happy they did.
Following the Disney Blueprint
Danny Vena (Netflix, Inc.) Disney is one of the most recognizable names in the entertainment industry, and its multibagger returns have been the result of developing cutting-edge technology, taking huge financial risks, and building a global media powerhouse on a foundation of growing intellectual property.
If any of that sounds familiar, it should. Netflix began as a successful DVD-by-mail service. Not content to stop there, it was a pioneer in streaming in 2007. Netflix began producing its own content with the release of House of Cards in 2013, but it soon realized the economics would improve by owning, rather than merely helping finance, its shows. It now owns such massive hits as Stranger Things, Making a Murderer, and 13 Reasons Why.
This year alone, Netflix will spend over $6 billion on content, with an eye toward owning more than half of it. This plan requires a large upfront investment, and some worry that the negative cash flow could be its undoing, but its growing subscriber base mitigates some of that risk.
In another move taken directly from Disney's playbook, Netflix turned heads last month with its acquisition of comic-book publisher Millarworld. This move provides the company with a new treasure trove of original content. But that's not its biggest gamble to date. That came in January 2015, when the company revealed that it would expand its service worldwide by the end of 2016.
All of thwse big bets have been paying off. Netflix now boasts more than 104 million subscribers worldwide, up 25% in its most recent quarter, with revenue that increased 32% year over year. Netflix's stock has already returned more than 14,000% since its IPO in 2002, eclipsing Disney's returns, but I think there's much more to come, leaving investors to Netflix and chill.
Outperforming in more ways than one
Cory Renauer (AbbVie Inc.): Beating Disney's performance this year has been easy, but this big biotech's stock price has outshined the Magic Kingdom's since it spun off from Abbott Laboratories at the beginning of 2013. Larger principal growth isn't the only way AbbVie's long-term shareholders have come out ahead. Placed side by side, the drugmaker's dividend growth makes Disney's distribution look like a Mickey Mouse operation.
At recent prices, AbbVie's 3.03% yield trounces the 1.6% Disney stock offers. Looking ahead, there are reasons to suspect AbbVie will continue to grow its bottom line and treat its investors to more big payout bumps in the years to come than its peers will offer. AbbVie's biggest source of revenue, Humira, finished the first half on pace to generate about $17.7 billion in sales for the full year, and a recent court decision could help keep competition at bay long enough to allow more recently launched drugs a chance to replace revenue from the aging anti-inflammatory drug.
Perhaps the most important rookie in AbbVie's lineup, Imbruvica, has been a huge success since it became the first chemo-free treatment option for patients with the most commonly diagnosed form of leukemia. In the first half of 2017, AbbVie's share of sales from Imbruvica, which it markets in partnership with Johnson & Johnson, grew 43.6% over the previous year period to about $1.2 billion.
AbbVie's portion of annual Imbruvica sales could reach $5 billion at their peak, and it has an experimental eczema drug in development that could generate more than $3 billion in annual sales, if approved. In clinical trials, half of patients given a daily dose of upadacitinib reported clear, or almost clear, skin.
Cory Renauer has no position in any of the stocks mentioned. Danny Vena owns shares of Netflix and Walt Disney and has the following options: long January 2018 $80 calls on Walt Disney and short October 2017 $105 calls on Walt Disney. Steve Symington owns shares of Nvidia. The Motley Fool owns shares of and recommends Netflix, Nvidia, and Walt Disney. The Motley Fool has a disclosure policy.