Netflix (NFLX 0.21%) has generated jaw-dropping returns for early investors, with shares of the video-streaming giant climbing more than 15,000% from its initial public offering just 15 years ago. Of course, few people had the resolve to buy early and hold for the entirety of that incredible run. But it's worth noting those who purchased a mere five years ago have watched the value of their investment increase more than 2,100%, including a nearly 90% rise in the past year alone.
That raises the question: Are there any stocks on the market today that could do even better?
We asked three top Motley Fool investors for their thoughts to that end. Read on to learn what they had to say about Disney (DIS 0.24%), Activision Blizzard (ATVI +0.00%), and Cirrus Logic (CRUS 3.21%).
Image source: Getty Images.
Sit back and enjoy the show
Steve Symington (Disney): Disney has already delivered incredible returns for investors and is arguably the most successful entertainment conglomerate in history; even excluding dividends, shares have climbed nearly 90% over the past five years alone.
But Disney stock also trades around 15% below its 52-week high set in April, thanks largely to concerns over the sluggish performance of its core media networks segment. Perhaps most notably, Disney has suffered from cord cutters and the declining subscriber base of ESPN, of which the company owns an 80% stake.
Along with its second-quarter report last month, however, Disney unveiled an ambitious plan to not only launch an ESPN-branded streaming service early next year, but also introduce a Disney-branded direct-to-consumer streaming service in 2019. Both are clear signals that Disney is willing to evolve to better capitalize on consumers' changing media habits.
If that wasn't enough, the relative out-performance of Disney's parks & resorts and studio segments should continue to prop up the company in the meantime -- though investors should know that this year's terrible hurricane season will almost certainly have short-term repercussions for the former. But the latter is also poised to benefit from multiple blockbuster theatrical releases over the next year, including Marvel's Thor: Ragnarok and Pixar's Coco in November, LucasFilm's Star Wars: The Last Jedi in December, Marvel's Black Panther next February, Avengers: Infinity War and a Han Solo Star Wars film next May, Pixar's The Incredibles 2 next June, and Ant-Man and the Wasp in July 2018.
Finally, keep in mind Disney aims to return around 20% of all cash it generates to shareholders in the form of stock repurchases and dividends. So for investors willing to buy now, let those capital returns compound and enjoy the show as Disney navigates today's evolving media landscape in the coming years, I think the Disney stock could easily soar more than Netflix going forward.
Activision Blizzard can win this game
Demitri Kalogeropoulos (Activision Blizzard): Activision Blizzard is up almost 80% this year to make it one of the top gainers in the entire market. That rally could just be the start for this video game publisher, in my view.
The company is driving -- and benefiting from -- two favorable industry trends that promise to keep pushing profitability to new records. High-margin digital sales jumped to 80% of its business last quarter, for one. And secondly, video games titles are seeing their useful life extended, as expansion packs and content upgrades become more accepted. Activision recently released a major upgrade to its two-year old Call of Duty: Black Ops III title, even as it put the finishing touches on this year's franchise launch.
Like Netflix, the video game giant is enjoying record engagement levels and boasts an audience that's consuming billions of hours of content across its portfolio. But whereas the streaming video giant's sales are basically limited by subscriber growth, Activision has a wider range of potential growth avenues it can pursue. These include consumer product sales, e-Sports, advertising, and whatever other strategies that CEO Bobby Kotick and his team can put together to monetize their base of over 400 million highly engaged gaming fans.
Cirrus should be soaring way higher
Anders Bylund (Cirrus Logic): The secret to life-changing investment returns lies in finding companies that want to do more than just turn a profit. Netflix saw a rusty entertainment industry that was overdue for a couple of shakeups. Fantastic stock returns simply followed when the company followed through on that game-changing business opportunity.
Likewise, the first item on Cirrus Logic's agenda is to create high-quality audio and signal processors that are literally "engineered to rock." Build great products and the business results will follow. That's how Cirrus serves its customers, shareholders, and employees on equal footing.
In recent years, the company's largest customer has been Apple (AAPL 0.20%). Cirrus chips have been found driving the audio systems of every iPhone, iPad, and iPod since the early days of the smartphone era. Other chipmakers have tried and failed to replace Cirrus in this coveted market spot, but Apple has only expanded its reliance on this company instead.
Beyond the Apple opportunity, Cirrus also counts Samsung Electronics (NASDAQOTH: SSNLF) as a major client. This way, the audio chip designer serves the two largest players in the mobile industry. Next up, Cirrus is exploring design wins among the largest phone designers in China. As it turns out, high-quality audio can serve as a selling point for phone makers across the industry and Cirrus Logic stands ready to benefit from that emerging trend.
All told, Cirrus has grown its sales by an annual average of 29% in the last five years while earnings expanded by 25% per year. Share prices have been lagging behind these great fundamental growth rates. The stock is trading at an affordable 13 times trailing earnings today, leaving lots of room for future shareholder gains.
