Yahoo Finance 3 Stocks to Buy and Hold for 20 Years
In the ever-changing world of business, it might seem foolhardy to recommend holding a company for 20 years. After all, markets can change, demographics shift, and technology quickly becomes obsolete. The mark of many a successful company is its ability to adapt its business model as the world evolves.
With that in mind, let's look at three companies that have shown that they not only have the capacity to change, but to thrive in the midst of transformation. Read on to find out why Netflix (NASDAQ: NFLX), Disney (NYSE: DIS), and Amazon.com (NASDAQ: AMZN) are well versed in changing with the times.
A scene from the Netflix original series The Chilling Adventures of Sabrina. Image source: Netflix.
Not always a streaming giant
Netflix wasn't always the worldwide streaming leader we know today. The company launched in 1997 as an online DVD rental store. Rather than go to the video store and walk up and down the aisles to choose a movie, customers could build a list from the comfort of their own homes and have DVDs mailed from that queue.
CEO Reed Hastings proved he was ahead of his time when he launched the company's streaming service in 2007. Many believed this was folly, particularly when the move began to cannibalize the company's cash cow DVD-by-mail service. Hastings was right, and streaming joined the mainstream with a vengeance.
Netflix has evolved several more times in recent years. When it became clear that media companies would begin to charge more for their programming, Netflix began first producing, then owning much of its content. What was at the time a risky proposition has become one of the company's key competitive advantages.
Now the world's streaming leader, Netflix reports that its global paid memberships grew 26% year over year in 2018, and now exceed 148 million. The company grew revenue to nearly $16 billion in 2018, up 35% year over year. Even more importantly, its profit margins continue to expand, growing to 7.7%, up from 4.8% in the prior year.
Disney California Adventure's Pixar Pier at night. Image source: Author.
The House of Mouse evolves
Walt Disney first put out a shingle nearly a century ago, when Walt and his brother Roy opened a small office in 1923.
The company has undergone a number of transformations over time. After years of producing animated shorts featuring Mickey Mouse and Donald Duck, Walt Disney came up with the idea for a full-length animated feature. The idea was openly mocked in the press, which referred to the venture as "Disney's folly." That project lead to the release of Snow White, which became the highest grossing film of its day, and is still a classic by any standard.
The company has continued to adapt with the times in recent years, adding Pixar, Marvel, and Lucasfilm studios to its coffers, as well as its recent acquisition of Fox. These will all play heavily in the debut of Disney+, the company's flagship streaming service, which will arrive later this year -- yet another move in the company's continuing evolution.
Even as Disney's broadcast and cable businesses have begun a slow decline, revenue grew 8% year over year in fiscal 2018, while net income surged 40%. What drove the gains? Studio entertainment revenue grew 19% and parks and resorts increased 10%, both year over year, while operating income from those segments increased 27% and 18%, respectively.
Image source: Amazon.
Not just a bookseller anymore
It would be hard to talk about company reinvention without including Amazon. The company began life as an online bookstore, but quickly evolved into an "everything" store. Amazon set the standard that other e-commerce companies aspire to -- and even that doesn't begin to do the company justice.
In addition to becoming the world's largest digital seller, Amazon has chosen a path of constant exploration and reinvention that has been unmatched by any other company. It pioneered both cloud computing and smart speakers, and remains the biggest single player in each. And Amazon has made decisive moves into a variety of disparate categories, including streaming video, advertising, streaming music, freight and logistics, robotics, and artificial intelligence. The company also has a growing presence in brick-and-mortar retail.
While not all of its bets pay off, enough do. Amazon's revenue grew 31% year over year in 2018, while net income more than tripled. Amazon Web Services, the company's cloud computing segment, grew to more than 11% of total revenue and accounted for more than half its operating income -- helping to fund its expansion into other markets and technologies.
20 years is a long time
It's important to note that choosing businesses that have been successful at reinventing themselves provides no guarantee that the companies will continue to be market-beating investments. That said, the ability to adapt to a changing marketplace is one important indicator that a company is capable of succeeding for decades to come.
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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. Danny Vena owns shares of Amazon, Netflix, and Walt Disney and has the following options: long January 2021 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.
