Stock picking can be overwhelming, especially if you're a new investor. But here's the most important piece of advice I can offer: Approach investing with a long-term mindset. Specifically, buy stocks that you feel comfortable owning for at least three to five years.
If you don't know where to start, try looking for businesses with an advantage. In other words, before buying a stock, ask yourself, "What does this company have that its rivals lack?" Companies with a competitive edge are often great long-term investments.
For instance, Adobe (ADBE +0.63%) and Walt Disney (DIS 0.81%) fit that bill, and both stocks have been big winners in the last decade, rising about 1,970% and 360%, respectively. Here's what you should know.
Image source: Getty Images
1. Adobe
Adobe has become one of the world's premier software brands. Its cloud-based tools play an important role by helping clients design creative content and deliver personalized customer experiences.
Adobe Creative Cloud is the company's flagship software suite. It includes products like Photoshop for image editing, InDesign for page layout, and Illustrator for graphic design, all of which are industry-leading solutions. And as digital media evolves, so has Adobe -- its portfolio also includes tools for 3D design and augmented reality.
Adobe Experience Cloud is a more recent addition to the company's portfolio. This platform blends things like analytics and marketing, allowing clients to collect data, manage content, and engage consumers across digital channels, including web, mobile, and video. To supercharge this business, the company acquired Workfront in Dec. 2020. This workflow-management specialist should help Adobe's clients work more efficiently, adding value to the Experience Cloud platform in the process.
Notably, the complementary nature of Adobe's various products is a key selling point. Rather than stitching together multiple solutions from different providers, clients can use its software to seamlessly cover all of their content creation needs. This gives the company an edge over its rivals.
Financially, the company is a machine. After nearly 40 years in business, it continues to post solid financial results like clockwork. Not many companies can make the same claim.
|
Metric |
Q2 2017 (TTM) |
Q2 2021 (TTM) |
CAGR |
|---|---|---|---|
|
Revenue |
$6.5 billion |
$14.4 billion |
22% |
|
Free Cash Flow |
$2.4 billion |
$6.6 billion |
29% |
Source: Ycharts. TTM = trailing-12-months. CAGR = compound annual growth rate.
Management estimates its total addressable market could be as large as $147 billion by 2023, leaving plenty of room for the company to grow. More importantly, Adobe has built a valuable brand and established itself as an industry leader. Those advantages should help the company capitalize on its massive market opportunity. That's why this growth stock looks like a smart investment for new investors.
2. Walt Disney
According to Fortune, Walt Disney is the fourth most-admired company in the world, and it's easy to see why. Its content portfolio is stacked with fan favorites, including action-packed titles from Marvel and Star Wars, family friendly films from Pixar, and a host of animated and live-action classics like Frozen and The Lion King.
In fact, Disney films accounted for nearly 40% of U.S. box office receipts in 2019, and the company has produced 7 of the top 10 grossing cinematic titles of all time. No rival can make the same claim -- that's what makes the Magic Kingdom so magical.
Image source: Disney.
Looking ahead, the bull case for Disney is straightforward: As streaming continues to take share from linear TV, its best-in-class content and extensive sports programming rights should drive growth across its direct-to-consumer (DTC) services: Disney+, ESPN+, and Hulu. Likewise, as movie theaters and theme parks continue to reopen, pent-up consumer demand should translate into strong ticket sales.
It's still early, but these trends are already making their mark on the company's results. Since launching in 2019, Disney+ has added over 103 million subscribers, making it the second largest streaming service worldwide. Moreover, Disney's DTC sales surged 65% in the first half of fiscal 2021 to $7.5 billion.
Walt Disney World and Disneyland are both open again, and during the most recent earnings call, CFO Christine McCarthy noted strong domestic bookings for park reservations. Marvel's Black Widow debuted in theaters not long ago, raking in $215 million during its first weekend, including $80 million in domestic box office receipts. That makes it the largest domestic opening since the start of the pandemic.
As a final thought, investors shouldn't expect Disney stock to double or triple in the near term, though I believe those returns are possible over time. Regardless, Disney's award-winning content and popular attractions create an ecosystem that no rival can match. And in my opinion, that ironclad competitive edge makes Disney a strong long-term investment.
