A century ago, the end of World War I sparked a decade of rapid economic growth dubbed the Roaring Twenties. That golden age ended with the Wall Street Crash of 1929, which led to the Great Depression -- but investors made plenty of money before the party ended.
Today, some economic gurus believe the COVID-19 pandemic will spark a comparable decade of prosperity called the "Roaring 2020s." When the pandemic finally ends, pent-up demand for dining, brick-and-mortar shopping, travel, and other forms of entertainment could erupt.
Over the following years, new technologies -- including 5G devices, cloud services, AI algorithms, and driverless cars -- could light fresh fires under the chipmaking, industrial, and manufacturing sectors. All those tailwinds could lift the new bull market, which only started last August, to fresh highs.
If you believe the Roaring 2020s will start after the pandemic ends, it could be a great idea to hold shares of Disney (DIS 0.70%), ASML Holding (ASML 1.30%), and Snap (SNAP 0.18%) over the next decade.
The pandemic forced Disney to close its theme parks and postpone its new movie releases. The economic fallout also throttled ad purchases across its television networks, and it continued to lose cable network subscribers to streaming platforms.
But despite all those challenges, Disney's stock has rallied nearly 70% over the past 12 months and currently hovers near its all-time highs. That might initially seem absurd since Disney's revenue fell 6% in 2020 and tumbled another 22% year over year in the first quarter of 2021.
However, Disney's streaming business continued to expand throughout the pandemic. It ended the second quarter with 94.9 million Disney+ subscribers, 39.4 million Hulu subscribers, and 12.1 million subscribers on ESPN+ -- and it recently launched a new streaming platform, Star, in several overseas markets to showcase its adult-oriented content.
The bulls believe Disney's theme park and movie businesses will rapidly recover after the pandemic ends, and its growing streaming ecosystem will complement that growth. Those strengths -- along with Disney's sprawling stable of evergreen franchises like Marvel, Star Wars, and Pixar -- make the House of Mouse an essential growth play for the Roaring 2020s.
ASML holds a near-monopoly in photolithography systems, which are used to print circuit patterns onto silicon wafers. The Dutch semiconductor equipment maker's top customers include Taiwan Semiconductor Manufacturing, Samsung, and Intel, which all use its EUV (extreme ultraviolet) photolithography systems to produce their smallest and most powerful chips.
ASML's stock price has risen more than 500% over the past five years, as rising demand for chips boosted orders for its photolithography machines. Its revenue increased 18% in 2020, and analysts expect 33% growth this year as it sells more high-end EUV systems.
ASML developed its EUV systems, which accounted for 43% of its system revenue last year, over the past two decades, which gives it a comfortable technological lead against its smaller rivals. Its gross margins have consistently expanded over the past few years, and analysts expect its earnings to grow at an average rate of 17% over the next five years.
The growth of new markets -- such as 5G phones, connected cars, larger cloud data centers, and the Internet of Things -- should all boost demand for more chips over the next decade. It's smart to invest in individual chipmakers that will profit from those tailwinds, but it's arguably smarter to simply invest in ASML and profit from the broader market's secular growth.
As advertisers loosen their purse strings again, their budgets will flow into companies that rely heavily on digital ads. Facebook (META 1.26%) might initially seem like a good pick for an incoming advertising boom, but I believe Snap will generate much stronger growth with a lot less drama.
Snap's Snapchat is shielded from the regulatory headwinds that threaten to rein in Facebook's power. Snapchat is smaller, but it excels at locking in Gen Z and millennial users with its ephemeral messages, Discover videos, AR lenses, and in-app games.
Snapchat's daily active users (DAUs) rose 22% year over year to 265 million in the fourth quarter of 2020, marking an acceleration from the third quarter, and its average revenue per user (ARPU) jumped 33% to $3.44 -- marking its strongest growth in five quarters.
Snap's revenue rose 46% to $2.51 billion for the full year, and it generated a positive adjusted EBITDA of $45.2 million, compared to a loss of $202.2 million in 2019.
Snap recently predicted it could maintain over 50% annual revenue growth for "multiple years," which suggests its ad sales will accelerate after the pandemic passes and remain elevated as advertisers target its coveted audience of younger users. Those strengths could help Snap easily outperform Facebook and other older social networks throughout an economic expansion.