Apple (AAPL 7.35%) and The Walt Disney Company (DIS 1.00%) make attractive investments as leaders of their respective industries. These companies operate in vastly different areas of consumer goods, with perhaps the only overlap being their participation in streaming. However, their dominance in consumer tech and entertainment, two neverending commodities, means their stocks are almost guaranteed to gradually trend up over the long term.
Apple and Disney's stocks are both compelling buys, but if you only have room for one in your portfolio, you'll need to know which is the better buy. So let's find out.
1. Apple: A reputation of consistent growth
One of the best reasons to invest in Apple is its reputation for stability, which allows its stock to stay consistent amid short-term headwinds. For instance, a sell-off brought on by macroeconomic declines pulled the entire market down last year, with Apple not unscathed. However, as seen in the chart below, the company was one of the few to outperform the Nasdaq Composite.
Data by YCharts.
Apple's low volatility mainly stems from the fact that when its stock dips, people buy. The company's shares have soared 274% in the last five years and 941% in the last decade, attracting many investors to the immense growth it has traditionally delivered.
Apple shares will likely continue to deliver gains thanks to the potency of its brand. A priority on quality and ease of use with its products has led it to gain leading market shares in smartphones, tablets, smartwatches, and headphones. The company has proven time and time again that its brand has the power to dominate nearly any market it enters, with each of these industries led by different companies before Apple showed up on the scene.
As a result, reports that the tech giant has plans to launch its first-ever virtual/augmented reality headset later this year are promising. If its past success when entering new markets is anything to go by, an investment in Apple could be an investment in the future leader of the $31 billion industry, projected to hit $52 billion by 2027.
2. Disney: Back on a growth path
While Apple dominates consumer tech, 2023 sees The Walt Disney Company enter its 100th year of offering hard-hitting entertainment. As the home of brands such as Marvel, Star Wars, Pixar, and Walt Disney Studios, the company has achieved substantial market shares at the box office, theme parks, and streaming.
The House of Mouse has experienced a particularly challenging few years with COVID-19 pandemic closures followed by last year's economic downturn. As a result, despite a recent rally, Disney shares remain down 24% year over year. Investors have pulled back as the company's media and entertainment segment reported a 42% year-over-year drop in operating income in fiscal 2022, largely driven by a costly investment in streaming content.
However, Disney appears to be back on a growth path, with CEO Bob Iger planning to cut costs by $5.5 billion. The bulk of that would come from cuts to content spending, on the way to making the company's flagship streaming service, Disney+, profitable by 2024.
Another good sign for Disney's future is its plan to soon reinstate stock dividends after halting them amid pandemic headwinds in May 2020. The move would suggest the company's financial future is bright, with executives expecting earnings to grow going forward.
Disney's stock has slightly declined over the last five years but has risen 68% over the last decade. As a result, expect to hold this entertainment stock for the very long term to reap the rewards.
Is Apple or Disney the better buy?
Apple is no doubt the better buy between these companies. Its performance during an economically challenging 2022 makes its stock growth more reliable. Meanwhile, the company's stock is more attractive, considering Disney still has yet to bring back dividends. Apple's dividend isn't much, offering a 0.6% yield. However, Apple's immense stock growth over the last five years, alongside its dividend, will provide larger gains in the long term than Disney shares.
Moreover, Apple's free cash flow of $97.5 billion compared to Disney's $94 million as of Dec. 30 suggests the iPhone company is better equipped to overcome further economic declines if they should arise. So, if you're between these two market leaders, Apple stock is the better buy.
