I don't know about you, but my crystal ball has been on the fritz for as long as I can remember. I don't know for certain what's going to happen in the next few minutes, let alone what's likely to happen 50 years from now. With that disclaimer out of the way, choosing stocks that will still be thriving in five decades may be difficult -- but not impossible.
Finding companies that are pioneers in their given field, have a decades-long track record of success, or are riding a growing societal trend can increase the chances that these stocks will still be rewarding investors come 2068.
With that in mind, we asked three fool.com contributors to choose top companies they believed would stand the test of time. Interestingly, they all selected companies that have ties to content development and streaming video. Read on to find out why they chose Disney (NYSE: DIS), Netflix (NASDAQ: NFLX), and Amazon.com (NASDAQ: AMZN).
Image source: Getty Images.
Here we are; now entertain us
Dan Caplinger (Disney): People's appetite for entertainment shows no bounds, and the companies that have successfully developed interesting and entertaining content for viewers to watch have the potential to enjoy unprecedented levels of demand for their products. Disney is in an enviable position, with numerous content-generating franchises that have the potential to knock out billion-dollar blockbuster movie releases indefinitely into the future.
Much of the attention that Disney has gotten lately has been negative. At the same time that cable subscription revenue for its flagship ESPN and other television distribution networks is on the decline, Disney has faced the challenge of paying increasingly huge sums for broadcast rights to the most popular sports leagues. Yet the House of Mouse has been in the game long enough to put its content-development prowess to work in other areas of its business, profiting in other ways from the same trends that has made ESPN suffer.
Image source: Disney's Marvel Studios.https://news.marvel.com/movies/86150/avengers-reassemble-set-avengers-infinity-war-take-thanos/
It's always hard to project forward 50 years, but what's certain is that people will continue to want to be entertained. With nearly a century of experience in doing just that, Disney has already shown that it can adapt to changing appetites and provide the entertainment that moviegoers, theme park visitors, cruise ship travelers, and television watchers will want to see for decades to come.
Tune in for the long term
Demitrios Kalogeropoulos (Netflix): The home entertainment market is going through its biggest disruption since TV replaced radio as the dominant way that people consume media. Now it's broadcast television's turn to hand that title over to internet-delivered content.
Netflix has been the biggest beneficiary of the early years of this transition. Its subscriber rolls have shot up past 125 million in just eight years, which has helped the stock approach the valuation of companies with far more experience in the media business, like Disney.
"Stranger Things 2" characters. Image source: Netflix.
Netflix appears closer to the beginning of its growth story than to the end, though. It still has a large international opportunity, given that only half of its members come from outside of the United States. There's also plenty of room for subscriber prices, which today hover around $11 per month, to rise given the relatively small amount of time users watch its service on a daily basis. The company's prices should closely track engagement levels and as members get more value from the streaming service, they can expect to pay more.
Of course, there's likely to be volatility, including new competitive threats, ahead. But Netflix has a better shot than rivals at adapting itself through the changes. Its original content strategy only started a few years ago, for example, and has now become a cornerstone of its competitive advantage. I'd expect the company to manage many more entertainment wins like that as the industry grows in the coming decades.
Multiple growth engines
Danny Vena (Amazon): Unless you've been living in a cave, you're probably aware that Amazon is not only the largest e-commerce player in the U.S., but among the top retailers in the world by revenue. A study late last year found the company may have grabbed as much as 44% of online sales in the U.S. and 4% of all retail in the country. E-commerce represents less than 10% of all retail in the U.S., leaving plenty of room for growth.
Image source: Amazon.
It's important to note that Amazon is still in the early stages of its international expansion, and has achieved nowhere near the penetration worldwide that it has in the U.S. The company's international segment grew revenue by 23% year over year in 2017, but still accounts for only 30% of total sales. With the rest of the world yet to conquer, its e-commerce sales could continue to soar -- and that's not Amazon's only growth engine.
Amazon Web Services (AWS) was the catalyst for the trend toward cloud computing, which has been gaining steam in recent years. AWS remains the leader, growing sales by 43% last year and producing massive operating margins of 25%. While other providers are rushing to catch up, Amazon continues to innovate, adding services to maintain its lead.
While Netflix gained the early advantage in streaming video, Amazon moved aggressively into the space and currently ranks No. 2., with 36% of streamers using the service, compared to 61% for Netflix. A growing number of consumers are using multiple streaming services to get their viewing fix, giving Amazon further opportunities for growth.
With multiple potential growth drivers and a long runway, Amazon is a no-brainer stock to own for the next 50 years.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Dan Caplinger owns shares of Walt Disney. Danny Vena owns shares of Amazon, Netflix, and Walt Disney and has the following options: long January 2019 $85 calls on Walt Disney. Demitrios Kalogeropoulos owns shares of Amazon, Netflix, and Walt Disney. The Motley Fool owns shares of and recommends Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.