Building wealth through stocks is quite simple, if you maintain a long-term mindset and stick with excellent companies during turbulent markets. Buying a stock with the idea of holding it forever allows me to stay focused on what really matters in investing: the performance of the business, not the short-term wiggles of its stock price.
Here are four stocks I intend to hold for a long time.
Image source: Getty Images.
Take-Two and Activision Blizzard: Growing video game empires
I'm a big believer in investing in stocks that are benefiting from megatrends. We all want to put money away in stocks that we are confident will grow in value over time. Identifying secular trends, and investing accordingly, is a great way to stack the odds in favor of finding a life-changing investment.
The growth of interactive entertainment is one megatrend that's well represented in my stock portfolio. I own shares of all the top U.S.-based game companies, but my two favorites are Take-Two Interactive (TTWO 0.42%) and Activision Blizzard (ATVI). These stocks have had their ups and downs, but over the last 10- and 20-year periods, they have both beaten the broader market significantly, and I expect these top gaming stocks to continue rewarding investors.
The advancement of computing processing power is the engine that drives the industry. Over the last 10 years, video game sales have grown steadily thanks in part to the emergence of esports and mobile gaming, two markets that have only been made possible by technological advancements.
Take-Two has outperformed its peers over the last five years due to the monster sales of its flagship franchise, Grand Theft Auto. Grand Theft Auto V and Red Dead Redemption 2 have sold a combined 167 million units, which is a large installed base to sell future installments of these franchises.
Take-Two is a particularly good gaming stock to consider ahead of the launch of Sony's PlayStation 5 and Microsoft's Xbox Series X consoles this holiday. It has a deep pipeline of dozens of titles in development for release within the next five years, including new officially licensed games in partnership with the NFL. A stellar record of growth and a promising future make Take-Two an excellent video game stock.
Activision Blizzard has strong momentum from the shelter-in-place period during the pandemic. It has a diversified roster of popular titles, such as Call of Duty and the mobile game Candy Crush. Across all its games, Activision Blizzard reaches more than 400 million users each month.
It also has long-term upside with Overwatch League and other esports initiatives that could grow into a sizable business on their own down the road. Its large base of players and diversified game library make Activision Blizzard one of the more profitable companies in the industry, which is why Activision is one of the few gaming stocks to pay a dividend.
Nike and lululemon athletica: The best athletic apparel stocks
Another trend that has been around for decades but just keeps going and going is the growth in the athletic apparel industry. Nike (NKE -0.74%) and lululemon athletica (LULU -1.26%) complement each other well for an investor looking to get exposure to this growing market. Nike dominates footwear, and Lululemon is outperforming on the apparel side. Sneakers make up two-thirds of Nike's total revenue, while Lululemon is all about selling "technical" clothing with its Science of Feel approach.
Both stocks have delivered big returns to investors so far. Lululemon is up more than 1,000% over the last decade, while Nike has returned more than 500%. While the pandemic put pressure on both companies' sales due to temporary store closures to stop the spread of COVID-19, both Nike and Lululemon keep investing in the future.
Nike is continuing its successful strategy to connect with customers digitally with its suite of training apps and e-commerce. Digital revenue made up 30% of the business last quarter and grew 75% year over year.
The company is also opening new House of Innovation stores that use digital capabilities to enhance the customer experience, such as the use of machine learning and advanced algorithms to help customers find the best fit. This is part of Nike's Consumer Direct strategy that management believes will enhance its profit margins over the long term, which should keep profits growing, fueling a higher stock price over time.
Lululemon managed to grow its revenue by 2% in the most recent quarter, even though it wasn't at full strength with many stores closed at the beginning of the quarter. However, there are positive indicators of underlying demand, such as recent waiting lines at stores, and the explosive growth happening in the e-commerce channel.
The Canadian athleticwear brand has tremendous upside, as it expands internationally and pursues other promising opportunities. Despite the stock's impressive run over the last decade, 73% of Lululemon's stores are in North America, pointing to a tremendous international growth opportunity. The company is also expanding into fitness services with its recent acquisition of MIRROR for $500 million. Plus, it still has a big opportunity in building brand awareness with men, since men's clothing made up only 21% of revenue last quarter.
The strong tailwinds in video games and athletic apparel should propel these growth stocks to further gains for long-term investors.
