Building a balanced portfolio of stocks involves finding a few core companies that have competitive advantages over their peers, and then buying their stocks and holding onto them for years to come.
If you're in the market for these types of stocks, then look no further than Apple (AAPL -1.23%), Walt Disney (DIS 1.64%), and Nike (NKE -2.40%). Here's why.
If you're still worried about Apple's prospects because of the company's slowing iPhone sales, then it's time you took a closer look at this tech giant.
Apple has shifted much of its focus away from how to increase sales of its iPhones and is now focusing on its wearable technology and services segments for future growth. This pivot is already paying off as Apple's wearables, home, and accessories segment sales increased by 54% in the most recent quarter.
Apple is benefiting from wearables mainly through its Apple Watch, which is the far-and-away leader in the smartwatch market. But Apple's wearables prospects have also expanded over the past few years from its acquisition of Beats by Dre and Apple's own Airpod lineup. Why does this matter? Because wearable tech spending is expected to increase by 55% between now and 2021, and the two biggest categories in this market are smartwatches and ear-worn devices.
Of course, Apple's services business will also be a key revenue driver going forward. In the most recent quarter, Apple's services sales increased by 18% year over year and now accounts for 19% of the company's total revenue. With Apple looking to potentially bundle its services together to entice users to sign up, and having just launched its new Apple TV+ service, the company is at the beginning stages of its bright services future.
Disney has always been a dominant player in the entertainment market, but the company's moves over the past few years have set it up to continue in that position for many years to come. Look no further than Disney's acquisition of LucasFilm and Star Wars, its purchase of Marvel Entertainment and its top-grossing film superhero franchise, and its $71 billion purchase of Twenty-First Century Fox to understand how Disney is edging out the competition in the media space.
However, Disney isn't just making smart acquisitions; the company is also putting those purchases to work already. The company's new video streaming service, Disney+, just launched a few weeks ago and includes a treasure trove of entertainment from the Star Wars franchise, the Marvel universe, Fox, and Disney's own massive vault of branded films. The company is also producing new and original films and shows for the service, which will provide an unending stream of video content for subscribers.
In just the first two weeks after its launch, Disney+ already has 10 million subscribers. Not all of those users will stick around after their seven-day free trial ends, but it's likely many will. Those millions of subscribers put the company on pace to reach its goal of 18 million subscribers by the end of Disney's fiscal 2020, and shows just how smart Disney's media acquisitions have been. With so much valuable content already available on Disney+, and much more being created to keep users around, Disney has set itself up for success for years to come.
Nike has one of the strongest retail brands in the world, and it will likely be able to put its brand to work to generate more value for many more years.
For example, Nike's sales increased by 7% in the most recent quarter to $10.1 billion. The company's sales and improved gross margin helped Nike's net income jump 25% in the quarter to $1.4 billion, with earnings per share reaching $0.86. That was impressive enough on its own, and it also outpaced Wall Street's consensus estimate of $0.70 per share.
Investors looking for how Nike will continue to grow in the coming years need to look no further than the retail giant's direct-to-consumer sales. Nike's durable brand power has allowed the company to move away from selling its products through retailers and sell directly to consumers, which enables the company to make more money from each sale. In the most recent quarter, the company's direct-to-consumer sales came in at $11.8 billion thanks to 35% growth in online sales.
With Nike's lucrative direct-to-consumer sales strategy already paying off and the company's brand as strong as ever, investors can bet that there are many more years of growth ahead for Nike.
Be patient and wait out the rough patches
Adding these growing and dominant companies to your portfolio doesn't mean you won't have to ride out some rough quarters. All companies experience setbacks, and Apple, Disney, and Nike aren't immune to that fact. But all of these companies have core competitive advantages that should help them continue to grow their businesses faster than their peers and create long-term gains for investors. Just remember to be patient, and don't jump off the ride at the wrong time.