A long-term mind-set can put you on the path to mastering the stock market, and it doesn't get much longer-term than picking stocks to own for decades to come. A lot can change over such a long period of time, but our Motley Fool investors think that Activision Blizzard (ATVI), Priceline (BKNG 1.99%), and Lockheed Martin (LMT -0.27%) have the staying power to deserve a spot in your portfolio. Here's why.
Getting in on gaming
Todd Campbell (Activision Blizzard): Activision Blizzard is connecting gamers in profit-friendly ways, and with esports in early innings, the potential for sales and earnings growth appears immense.
Technology is creating new ways to play, broadcast, and consume gaming content, and increasingly realistic games have players more engaged with gaming than ever before. For instance, Amazon.com's Twitch gaming site boasts 100 million monthly users, and half of those users spend more than 20 hours per week on its site. Alphabet's YouTube Gaming and Microsoft Mixer are also popular sites for sharing gaming tips and content. And as these sites outcompete traditional entertainment, including TV, they offer strong tailwinds for video game developers.
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Recognizing the growing demand for live gaming content, companies like Activision Blizzard are creating competitive events for top games.
There are over 140 million esports fans already, and sold-out crowds are common at arenas such as Madison Square Garden. These events have become so popular that esports winners can make more money than golfers who win the Masters Tournament. Last year, the esports market was worth $493 million, up 51% year over year, according to market research company Newzoo. This year, the market is expected to reach $696 million; by 2020, it could be worth $1.5 billion.
Activision Blizzard is perfectly positioned to benefit from this trend. It's built a Call of Duty league and it recently announced the first seven "city" teams for its Overwatch League. If competitive league play takes off, investing in Activision Blizzard could be like investing in the National Football League or Major League Baseball during their infancies.
Even better, you don't have to wait around for esports to grow to make money on this stock. Activision Blizzard's already racking up big revenue, with sales of $1.6 billion last quarter alone, including $1 billion that came from high-margin in-game purchases. Given that Activision Blizzard has eight billion-dollar gaming franchises and 407 million monthly active users, it's proven it knows how to win in this market.
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Take a vacation from worrying about your portfolio
Dan Caplinger (Priceline): The travel industry has changed forever. Gone are the days when people needed to make in-person appointments with travel agents to book flights and hotels, and even toll-free telephone operators at major airlines are showing signs of fading away. Instead, the internet has become the home for travel deals of all kinds, and Priceline has managed to become the leader in the online travel industry through its unique combination of pricing power and global coverage. With hotels, rental cars, and airline tickets available through the site, Priceline has aimed to become a one-stop shop for all of its users' travel needs.
Priceline has made smart acquisitions, with the purchase of Booking.com having been a prescient move that dramatically increased the international scope of its hotel network. Competitors have attempted to mimic Priceline's success, but none has managed to match the company thus far. The online leader has also done a good job of fighting against the rise of new up-and-coming travel options like Airbnb, listing private home rentals and similar properties alongside traditional hotel options, to give its users as many choices as possible. With a demonstrated ability to adapt to changing conditions, Priceline can hold a place in your portfolio for decades.
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A defense contractor with decades of contracts ahead of it
Rich Smith: (Lockheed Martin): If you're planning to buy a stock and hold it for decades, you'd better make darn sure the company has a business that will stay in business for decades.
Lockheed Martin is one such company, and it's not just me saying that: It's the U.S. Pentagon.
Mind you, Lockheed Martin is not a cheap stock. At more than 18 times earnings, it's cheaper than the average stock on the S&P 500 (where price-to-earnings ratios average more than 25), but Lockheed's price-to-sales ratio of 1.8 is still far above its historical average. Perhaps, though, this is because Lockheed Martin's prospects are also looking a bit better than average?
Sixteen years ago, Lockheed Martin won the contract to build the U.S. military's next-generation fighter jet, the F-35 Lightning II Joint Strike Fighter. Lockheed is the only defense contractor serving as prime contractor on the F-35, and according to no less a personage than the former chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, Lockheed's F-35 is probably "the last manned strike fighter aircraft the Department of the Navy will ever buy or fly."
This gives Lockheed Martin a literal monopoly on the production of the military's premier fighter jet for decades to come. Experts expect that more than 50 years from now, America's Air Force, Navy, and Marine Corps will still be flying F-35s -- and Lockheed Martin will still be building parts for, maintaining, servicing, and upgrading the plane. That's a five-decade-long revenue stream for Lockheed -- backed by the full faith and credit of the United States government. It's also a pretty good reason to buy and hold Lockheed stock for decades.
