There is a lot of noise in the stock market. Every day, discrete events send stocks up and down. These discrete events can be company-specific, like earnings reports, murmurs about mergers and acquisitions, analyst upgrades and downgrades, or investor presentations. Those discrete events can also be macro-related, including economic data or geopolitical news.
Nonetheless, every day, multiple events happen, causing the stock market volatility that we’ve been seeing from day to day.
Day traders would be wise to continue paying attention to each and every crackle of noise in this market. Long-term investors, however, will find it in their best interest to ignore that noise.
With that in mind, here is a list of 25 stocks that should, regardless of near-term noise, head significantly higher over the next several years due to secular growth tailwinds.
Unstoppable Stocks to Buy No Matter What: Apple Inc. (AAPL)
Source: Yuanbin Du Via Flickr
It is only fitting that this list starts with the biggest publicly traded company in the world, Apple Inc (NASDAQ:AAPL).
Apple got to this point ($930 billion market cap) by selling the world a ton of iPhones, iPads and Mac computers. But that business is drying up. Everyone who wants an iPhone, iPad or Mac already has one, so there aren’t really any new buyers in the market. Instead, Apple just gets the upgrade buyers every year.
Bears think this is a problem. But it’s not. Apple is shifting from consumer technology company to software technology company. Through various software services like iCloud, Apple Music, Apple Pay and the App Store, Apple is starting to monetize its massive iOS ecosystem. These software revenues are higher margin than the hardware revenues, and they are also more predictable (most of the money comes from subscriptions), so Apple is actually turning into a company with higher margins and more predictable revenue streams.
As this transformation plays out over the next several years, AAPL stock will head higher. The stock is pretty cheap on its face, trading at just 16-times forward earnings, and there is a bunch of cash on the balance sheet that will be weaponized over the next several years in the form of dividends, buybacks and acquisitions.
Unstoppable Stocks to Buy No Matter What: Axon Enterprise Inc (AAXN)
Although it is lesser known than Apple, Axon Enterprise Inc (NASDAQ:AAXN) is undergoing a similar transition from largely a hardware company to a software and hardware company.
Axon was formerly known as Taser International, and the business used to be selling tasers and other smart weapons to law enforcement agencies around the world. While selling all those tasers, the company also developed body cameras and accompanying cloud solutions to help store and analyze law enforcement data.
Because the company saw the writing on the wall that this body camera and cloud business was the future, they rebranded as Axon last year, and decided to give away a body camera for free to every police officer in the U.S. in an attempt to win over body camera and cloud contracts.
That plan has worked out beautifully. Now, essentially everyone who took part in the free trial, is a paying customer of Axon.
This growth story is still in its early stages. Law enforcement agencies globally are outdated. They desperately need a technology makeover. They also desperately need to reduce police shootings and misbehavior, two hot topics which have eroded the public’s trust in police. Axon provides the best-in-class solutions to fix both of those problems.
As such, AAXN stock, which is already up 110% this year, should continue to head higher over the next several years.
Unstoppable Stocks to Buy No Matter What: Adobe Systems Incorporated (ADBE)
One of my favorite cloud companies is Adobe Systems Incorporated (NASDAQ:ADBE).
ADBE dominates a niche part of the cloud that is dedicated to creative solutions. A few years back, the company shifted its business model from selling hardware to selling software, and shifted its core Adobe solutions to the cloud. In doing so, Adobe made its solutions subscription-based, so now consumers would have to pay repeatedly for a product that they used to only pay once for.
Naturally, Adobe users were upset. But that didn’t stop them from paying. They paid the subscription fee because there is essentially no other player in this market that is even close to offering solutions on-par with Adobe.
Consequently, Adobe has marched its way to unrivaled dominance in the creative solutions cloud market. This market is only growing, and Adobe is only growing with it. As such, ADBE stock, which is up more than 70% over the past year, will continue to be an out-performer over the next several years.
Unstoppable Stocks to Buy No Matter What: Amazon.com, Inc. (AMZN)
This list would, of course, be incomplete without including perhaps the biggest secular growth giant of them all, Amazon.com, Inc. (NASDAQ:AMZN).
The bears pound on the table about valuation regarding AMZN stock. But those bears must have sore hands, because they’ve been pounding on the table about valuation ever since AMZN was a $300 stock five years ago. Now, Amazon is near $1,600, and its current valuation (200-times trailing earnings) is actually cheaper than its valuation 5 years ago (~1000-times trailing earnings).
That is the beauty of the Amazon growth story. Amazon spends a bunch of money to grow market share in very important secular growth markets, like e-commerce and cloud services. The near-term result is super-charged revenue growth on anemic profitability, and that makes the valuation look absurd.
But then Amazon dominates a secular growth market, peels back those investments, and profitability ramps on what has become a massive revenue base. The long-term result, then, is super-charged revenue growth with super-charged profit growth. That makes the valuation look more reasonable.
Thus, as Amazon continues to grow as a company, AMZN stock will continue to grow into its valuation. Until something major knocks this secular growth company off its winning course, this is a stock to own for the next several years.
25 Unstoppable Stocks to Buy No Matter What: Alibaba Group Holding Ltd (BABA)
Any discussion about Amazon would incomplete without talking about its China counterpart, Alibaba Group Holding Ltd (NYSE:BABA).
For all intents and purposes, Alibaba is the China Amazon. The company dominates the digital commerce scene in China and most of Southeast Asia. They also operate a rapidly growing cloud business. Alibaba is also making huge pushes into offline retail, grocery, smart home, and artificial intelligence. Essentially, anything that Amazon is doing in the U.S., Alibaba is doing on the other side of the Pacific Ocean.
That makes Alibaba an equally big growth company as Amazon. In fact, Alibaba is actually growing more quickly than Amazon because China’s consumer class is booming right now. This boom should persist, and carry over to other parts of Southeast Asia over the next several years. Therefore, BABA should continue to be a big growth story over the next several years.
Also, Alibaba actually has really high margins considering its big-growth nature (adjusted EBITDA margins in core commerce were 43% last quarter). That means that this big revenue growth story already has big profit growth. That is the type of set-up that leads to a winning stock in a multi-year window.
25 Unstoppable Stocks to Buy No Matter What: Baidu Inc (BIDU)
Another hyper-growth China internet company that should out-perform over the next several years is Baidu Inc (ADR) (NASDAQ:BIDU).
Just like Alibaba is the China Amazon, Baidu is the China Google. And as the China Google, Baidu has become part of the underlying fabric of the internet in China and Southeast Asia. Thus, as internet usage continues to expand in those still developing and urbanizing markets, Baidu will benefit from higher usage and deeper engagement.
Moreover, digital advertising, which is Baidu’s core business, is booming in China. Roughly 5 years ago, less than 20% of total ad dollars in China went to digital channels. Now, nearly 60% of all ad dollars go to digital sites. Plus, the overall ad market is growing at a high single-digit pace, implying huge growth for the digital advertising segment.
Baidu is a key player in that red-hot digital advertising market in China, and as such, should be set-up for long-term success. The company also has tangential growth drivers through cloud and smart home, neither of which are priced into BIDU stock at current levels (the stock trades at just 25-times forward earnings).
25 Unstoppable Stocks to Buy No Matter What: Walt Disney Co (DIS)
Most of the stocks on this list have a history of success over the past several years, but not Walt Disney Co (NYSE:DIS). Owning largely to cord-cutting headwinds and persistent pain at the company’s ESPN segment, DIS stock is actually down 5% over the past three years.
The good news is that these headwinds are starting to move into the rear-view mirror. Disney is making an all-out push into the streaming world. Part 1 happened just a few weeks ago with the launch of ESPN+, which is essentially an on-demand, streaming version of ESPN with exclusive content. Part 2 will happen next year, when Disney launches its own Netflix-like service with Disney content.
Because Disney owns the best content in the world (think Stars Wars, Marvel, Pixar, Disney originals, and potentially even assets from Fox), Disney’s streaming service will be met with very high demand. At that point in time, Disney’s cord-cutting pain will take a backseat to what will be red-hot subscriber growth through Disney’s streaming service. DIS stock, which trades at just 14-times forward earnings, could explode higher on a positive sentiment shift.
Moreover, sports gambling is legal now. ESPN will certainly become a big player in what will be a large and growing sports betting market in the U.S. As that market grows, ESPN will find a way to grow with it.
All in all, despite its under-performance over the past several years, DIS stock will be a big winner over the next several years as certain tailwinds gain traction and offset current headwinds.
25 Unstoppable Stocks to Buy No Matter What: Facebook Inc (FB)
Facebook shook off what was its worst PR incident in company history with the Cambridge Analytica scandal and proceeded to report arguably its best quarter ever. That is a testament to not only how good management handled the situation, but also how powerful the Facebook machine has become.
This power comes in many forms. Everyone has a Facebook account (essentially 2 out of every 3 people in the world who can have a Facebook account, do have a Facebook account). That number could move closer towards 3 out of 3 considering that Facebook’s user growth remains very strong in geographies with low internet penetration.
Moreover, because of this massive size, Facebook can replicate essentially any internet-based business and successfully operate it at scale (think Instagram Stories and WhatsApp Status, or even think Messenger, which is just a messaging component the company added to Facebook). Also because of its massive size, Facebook’s advertiser demand is sky-high, and that demand will only grow once Messenger and WhatsApp get started on monetization.
Then there is everything else happening at Facebook outside of the core social networking apps. There is Facebook Watch, which could be huge in the streaming space, and Facebook Workplace, which could be huge in the enterprise social networking market. There is also Facebook Marketplace and the build-out of native payments capability, both of which could quickly turn Facebook into an e-commerce marketplace.
All together, there are many, many reasons why FB stock is a must-own for the next several years. Considering the still cheap valuation (less than 25-times forward earnings), FB stock could be a big winner in a multi-year window.
25 Unstoppable Stocks to Buy No Matter What: Fortinet Inc (FTNT)
Source: Dennis van Zuijlekom via Flickr
One of the best markets to gain exposure to over the next several years is cybersecurity. As everything goes online, including both important and valuable data, that data will need to be secured and protected. Thus, demand for cybersecurity solutions will only soar over the next several years.
One of the best investments in this space is Fortinet Inc (NASDAQ:FTNT). Fortinet is a really big, really strong cybersecurity company. Revenue growth over the past five years at Fortinet has run in the 20%-plus range, a sign that demand for the company’s solutions is both strong and stable. Most recently, the company reported 17% revenue growth, yet another sign that demand isn’t slowing by all that much despite increasing scale.
FTNT stock is a bit pricey at nearly 40-times forward earnings. But considering the secular growth prospects of the company and its strong track record of robust revenue growth, a 40-times forward multiple seems reasonable.
Thus, while FTNT stock might run up against some valuation friction in the near-term, this stock is a long-term winner due to its leadership positioning in a secular growth market with increasing necessity.
25 Unstoppable Stocks to Buy No Matter What: Alphabet Inc (GOOG)
Of all the FANG names, Alphabet Inc (NASDAQ:GOOG) is currently the weakest. Digital advertising revenue growth remains robust, but the shift to mobile is hurting margins because Google search wasn’t designed for mobile, so click-through rates are lower. Moreover, margins are being dragged down even further by Google’s big investments into cloud, smart home, and AI.
The near-term result is that while revenue growth remains robust, profit growth is weak. That has left GOOG stock range-bound in the $1,000 to $1,200 range for the past several months.
Longer-term, though, this stock will head considerably higher.
Revenue growth will never be a problem for this company. Google search is part of the underlying fabric of the internet, so as long as internet usage continues to increase, Google’s ad business will grow at a robust rate. Meanwhile, Google Cloud and smart home are still ramping. Plus, Waymo is getting ready to launch a self-driving car service, and this could be the beginning of Waymo generating billions of dollars in revenues.
Margin growth will also come back into the picture soon. Google’s core ad margins will remain pressured by the mobile shift. But eventually, those big investments into cloud, AI, and self-driving will peel back, and be replaced by super-charged revenue growth. That will lead to margin expansion and super-charged profit growth.
Thus, while GOOG stock is seemingly stuck in neutral right now, this won’t last forever. Eventually, margin compression will end, and GOOG stock will break higher.
25 Unstoppable Stocks to Buy No Matter What: GrubHub Inc (GRUB)
The at-home economy has arrived.
Whereas we used to go shopping at the mall, we are now more frequently shopping at home through Amazon. Whereas we used to go to the movie theater, we are now more frequently watching movies at home through Netflix.
Along these same lines, whereas we used to go out and eat, we are now more frequently ordering food online and having it delivered to our doorstep through apps like GrubHub Inc (NYSE:GRUB).
Because of this parallel, GRUB is somewhat on the same growth trajectory as NFLX and AMZN. Indeed, revenue growth at GRUB is currently bigger than revenue growth at NFLX and AMZN, and GRUB stock has outperformed both NFLX and AMZN stock over the past year.
GRUB won’t ever get a hundred billion-plus valuation like NFLX and AMZN because it is attacking a much smaller market, and that market has a lot more competition. But the company is in the right space of online food ordering and delivery, and is powered by the right growth drivers as at-home economy adoption only accelerates over the next several years.
As such, GRUB stock should be a big winner over the next 3-5 years.
25 Unstoppable Stocks to Buy No Matter What: Home Depot Inc (HD)
Home improvement retailer Home Depot Inc (NYSE:HD) is one of the more stable and secure investments in the market.
The company is often seen as the heartbeat of the U.S. economy. So long as the U.S. economy is healthy, HD will report good numbers and the stock will head higher. Considering that the U.S. economic growth outlook is only improving and that HD continues to report robust numbers, it looks like HD stock will continue to be a winner for at least the next 2-3 years.
Beyond that, of course, HD stock is susceptible to a big pullback if the U.S. economy goes sour. But even back in 2008, the stock’s peak-to-trough decline wasn’t worse than the market’s peak-to-trough decline (both fell about 50%).
Thus, in a worst-case scenario, I see HD stock as market-performer over the next several years. In a best-case (and more likely) scenario, HD stock should be able to continue to deliver out-sized returns to shareholders.
25 Unstoppable Stocks to Buy No Matter What: iRobot Corporation (IRBT)
The robots are coming, and there isn’t a better way to play this robot revolution on the consumer front than iRobot Corporation (NASDAQ:IRBT).
iRobot is the company behind the ultra-popular Roomba robotic vacuum. Adoption of the Roomba has soared over the past several years as adoption rates of robotic vacuums in the U.S. have gone from zero up to roughly 10%. That is why IRBT’s revenue growth has remained resiliently above 20% despite increasing scale.
But adoption rates are still only at 10%. Because robotic vacuums are simply automation (they take a simple human task and delegate it to a robot), adoption rates of these machines will continue to march higher over the next several years. As such, IRBT should be able to keep growing revenues at a 20%-plus clip.
The only risk here is competition. Competition, though, has been a risk for IRBT for several quarters now, and it has yet to show up in the numbers. Instead, as competition has supposedly increased, IRBT’s revenue growth trajectory has actually improved while gross margins have headed considerably higher.
All in all, IRBT stock will head higher over the next several years as consumer robotics adoption goes mainstream.
25 Unstoppable Stocks to Buy No Matter What: JD.Com Inc (JD)
Source: Daniel Cukier via Flickr
China e-retail giant JD.Com Inc(ADR) (NASDAQ:JD) has fallen on tough times recently, with the stock dropping nearly 30% off its early 2018 highs.
But the near-term concerns seem unnecessarily short-sighted. Margins are in retreat in the near-term because the company is investing big in order to grow its business. Namely, JD wants to expand its e-retail operations globally, make a big push into offline retail, automate its warehouses, and become a big player in the AI space.
Those are good investments that should yield positive long-term results. Thus, bears freaking out over near-term margin compression as a result of good investments seem to be missing the big picture.
In the big picture, JD is following in the footsteps of Amazon, which is big revenue growth on anemic profits, followed by big revenue growth accompanied by big profit growth. Eventually, JD’s big investment era will end, and margins will ramp higher on a considerably larger revenue base. At that point in time, earnings will roar higher and power a long-term upward trajectory in JD stock.
25 Unstoppable Stocks to Buy No Matter What: McDonald’s Corporation (MCD)
When it comes to the fast casual food sector, nobody does it better than McDonald’s Corporation (NYSE:MCD).
It seems every other QSR chain, from Chipotle Mexican Grill, Inc. (NYSE:CMG) to Subway to Taco Bell to all those poke and super-food shops, lives and dies by the trend. When the QSR trend is in their favor, they do well. And when it’s not, they don’t do well.
MCD is exempt from this because its biggest value props (price and convenience) don’t trend. Consumers always want price and convenience. McDonald’s dominates on price and convenience. Therefore, consumers continue to go to McDonald’s in great frequency.
It also helps when MCD is on trend. And recently, the company has gotten on-trend by revamping its menu to include healthier, fresher options that are more in-line with today’s health-conscious consumer.
Overall, due to its unparalleled value prop in price and convenience, MCD will continue to dominate the QSR space, and MCD stock will keep heading higher.
25 Unstoppable Stocks to Buy No Matter What: Momo Inc (MOMO)
What is the internet without online dating?
Momo Inc (ADR) (NASDAQ:MOMO), China’s big online dating platform, would argue that it isn’t much. And they’d be right. Although only 1 in every 10 U.S. adults had used online dating as of 2016, that number was nearly 25% for teenagers in 2015 (and is presumably way higher today). Clearly, the youth are using online dating, and that means that online dating is indeed a big part of the future internet.
That is good news for Momo. The company is behind the dominant online dating platform in China. Therefore, as China internet usage surges and the Chinese internet landscape starts to look and act like the U.S. internet landscape, online dating in China will turn into a big growth industry.
Indeed, this is already happening. Momo reported revenue growth of nearly 60% last quarter.
These big growth prospects, however, are being materially undervalued by the market. MOMO stock trades at just 16-times forward earnings, a multiple which doesn’t match up with its 60% revenue growth.
As such, MOMO stock is a case of big growth converging on a discounted valuation, a pairing which should propel significant share price out-performance over the next several years.
Long-Term Buy 17: Netflix, Inc. (NFLX)
By now, it should be clear that Netflix, Inc. (NASDAQ:NFLX) is marching towards world domination of the entertainment industry.
Back in 2011, Netflix split apart its DVD and streaming businesses. Everyone cried wolf, and subscribers quit platform en masse. But a year later, cable television viewership in the U.S. peaked. And seven years later, Netflix has 56 million streaming subscribers in the U.S. and 125 million globally.
Clearly, Netflix is doing something right.
That something right is delivering a whole bunch of quality content to consumers in an on-demand, multiple-screen fashion, and doing so at a very a low price point. In this sense, Netflix’s streaming services enhance the two most important things to consumers, price and convenience.
Because of its enhanced price and convenience value prop, Netflix will continue to grow its subscriber base at a robust rate until a majority of TV households around the world have a Netflix subscription. Moreover, because Netflix so so cheap, the company has a lot of wiggle room to raise prices, thereby boosting revenues and margins.
All in all, Netflix has two huge growth drivers over the next several years through global adoption and price hikes. The combination of those two growth drivers will propel NFLX stock higher in a multi-year window.
25 Unstoppable Stocks to Buy No Matter What: Nike Inc (NKE)
Nike Inc (NYSE:NKE) has long reigned as the king of the athletic retail industry.
The company’s dominance has been threatened time and time again over the past several decades, most recently by adidas, but each threat proves to be fleeting. The end result is that Nike continues to remain king of athletic retail.
This will continue over the next several years. Not only does Nike have a robust athlete portfolio in the critical big-growth basketball and soccer markets, but the company is also pivoting towards becoming more of a lifestyle brand with universal appeal, not just a performance brand with athlete appeal. This transition will only expand Nike’s market leadership position, and make the brand more appealing to more consumers.
Granted, NKE stock has had a run-up recently, and is pushing up against some valuation barriers (30-times forward earnings is a pretty big multiple for this stock). But near-term valuation friction aside, NKE stock should out-perform in a multi-year window due to its unparalleled leadership position in a big-growth and big-demand athletic retail market.
25 Unstoppable Stocks to Buy No Matter What: Nvidia Corporation (NVDA)
The company with perhaps the broadest exposure to multiple nascent secular growth markets over the next several years is Nvidia Corporation (NASDAQ:NVDA).
NVIDIA makes the chips which power tomorrow’s world. These chips are used in everything from artificial intelligence to cloud data-centers to automation to high-end gaming to high-performance computing. Because of this, NVDA has exposure to multiple markets that have big growth potential over the next 5-10 years. That gives NVDA stock a big and diverse multi-year growth trajectory.
NVDA stock does, however, trade as if that is the case. The stock features a greater than 30-times forward earnings multiple, which is pretty big. But in the context of the company’s exposure to multiple high-growth markets, that 30-times forward multiple doesn’t seem so big.
All in all, over the next several years, NVDA stock will continue to be a winner as investment into AI, data-centers, and automation accelerates.
25 Unstoppable Stocks to Buy No Matter What: Palo Alto Networks (PANW)
One of my favorite sayings in the market these days is, “Another day, another hack, another reason to buy a cybersecurity stock” .
But that saying could just as easily read, “Another day, another hack, another reason to buy Palo Alto Networks Inc (NYSE:PANW)”.
In other words, Palo Alto Networks is so big and so good at what they do that the company may as well be a substitute for the entire cybersecurity space. The company not only dominates the cybersecurity space, but that dominance comes with a consistent track record of 20%-plus revenue growth and healthy operating margin expansion.
This growth will continue. PANW’s customer base continues to grow at an absurd rate, while revenue growth continues to run at a 20%-plus rate. Sustained sizable growth in both user base and revenues illustrates that PANW is fully reaping the secular tailwinds pushing forth cybersecurity solution adoption globally.
Over the next several years, this strong growth will lead to PANW stock heading materially higher.
25 Unstoppable Stocks to Buy No Matter What: Proofpoint Inc (PFPT)
Cybersecurity company Proofpoint Inc (NASDAQ:PFPT) isn’t as big as the other cybersecurity giants on this list. But what Proofpoint lacks in size, it makes up for in growth.
Proofpoint isn’t like the Palo Alto Networks of today. It isn’t big, nor does it operate at 20% operating margins, nor is it the poster-child for the entire cybersecurity space.But Proofpoint is like the Palo Alto Networks of yesterday. The smaller version that was growing at 50% per year and expanding margins from 7% to 20%.
Last quarter, Proofpoint reported revenue growth of 40%. That is a big number. It is also bigger than the revenue growth the company reported the quarter before that (36%).This year, Proofpoint expects revenues to grow by 37%. That is the same growth rate as last year. It is also the same growth rate the company has maintained for the past five years.
In other words, this massive 30-40% revenue growth story isn’t slowing down at all. Meanwhile, operating margins are also ramping higher, and are expected to reach 14% by 2020.
In totality, PFPT has PANW written all over it. PANW stock has gone from $40 to $200 over the past 5 years. A similar rally could be in store for PFPT stock over the next 5 years.
25 Unstoppable Stocks to Buy No Matter What: Shopify Inc (SHOP)
Source: Shopify via Flickr
I’ve said it before and I’ll say it again. Few stocks in the market are supported by as powerful of a growth narrative as e-commerce solutions provider Shopify Inc (NYSE:SHOP).
The whole world is moving towards decentralization. Technology companies are taking power from the few, giving it to the many, and creating systems that optimally pair supply with demand. And its working.
Uber did this in the transportation industry. Airbnb did this in the accommodations space. YouTube has done in this in the entertainment world, while Netflix has done this in the content production realm. Facebook, Instagram, Twitter, Snapchat… all of those have done that in the information world.
Now, Shopify is decentralizing the digital commerce space. The company provides digital commerce tools which allow anyone to sell anything online. In the same way that Uber said anyone can drive and make money and that Airbnb said that anyone can rent out living space and make money, Shopify is saying that anyone can run a e-commerce shop and make money.
This is the future of e-commerce. And Shopify is spearheading it. As such, SHOP stock should be a big winner over the next several years.
Long-Term Buy 23: Tencent Holding (TCEHY)
The China internet growth narrative it still in its infancy relative to the U.S. internet growth narrative. Quite simply, U.S. internet adoption rates are right around 90%, while China internet adoption rates are still below 40%.
That means there is still a ton of growth left until China’s internet landscape is fully saturated like the U.S. internet landscape.
With that in mind, why wouldn’t you want to invest in China’s Facebook? TENCENT HOLDING/ADR (OTCMKTS:TCEHY), often labeled as China’s Facebook due to its billion user WeChat/Weixin app, is a hyper-growth company with broad exposure to China’s booming internet landscape.
That wast most evident in the company’s recent quarterly results, wherein revenues increased by 48% year-over-year, operating profits increased by 59% year-over-year, and net profits increased by 65% year-over-year.
Because of the still low internet penetration rates in China, this big growth supporting TCEHY is here to stay. Consequently, TCEHY stock will remain a big winner over the next several years.
Long-Term Buy 24: Take-Two Interactive Software, Inc (TTWO)
The video game is red-hot right now for two reasons.
First, video game publishers are figuring out how to optimally squeeze more money out of each video game buyer. Before, video game publishers used to make money on the physical video game sale. Now, video game publishers are making money on the physical video game sale, as well as through embedded micro-transactions. Thus, average revenue per each video game player is actually increasing by a lot right now.
Second, the video game industry is being injected with some cool next-gen technology. The most obvious example of this is the Nintendo Switch, which caused an unprecedented rise in video game demand last year.
Both of these tailwinds will persist. Micro-transactions will only grow in popularity over the next several years, while next-gen technology like VR/AR have yet to fully hit the video game world. Plus, the whole eSports category provides a strong tailwind. Because of this, video game stocks remain top investments over the next several years.
In this world, my top pick is Take-Two Interactive Software, Inc (NASDAQ:TTWO). The company has an exceptionally robust product portfolio that includes games like Grand Theft Auto which have enduring demand. TTWO is also the king of micro-transactions, and makes a bunch of its money through in-game purchases.
Long-Term Buy 25: Weibo Corp (WB)
But Twitter has a bigger market cap.
That doesn’t make much sense. Twitter’s larger market cap is simply a result of bigger revenues. But those bigger revenues are the result of higher ARPU, which is the result of the U.S. digital ad market being bigger and more complete than the China digital ad market.
Eventually, China’s digital ad market will be significantly bigger and just as complete as the U.S. digital ad market. At that point in time, Weibo’s ARPU should be on-par with, if not greater than, Twitter’s ARPU. Considering Weibo’s user base is 25% larger, that should translate to at least 25% higher revenues and a 25% bigger valuation.
Because of this, WB stock should remain a big winner over the next several years.
As of this writing, Luke Lango was long AAPL, ADBE, AMZN, BABA, BIDU, DIS, FB, GOOG, HD, IRBT, JD, MCD, MOMO, PANW, SHOP, TTWO, and WB.