There's an open secret in the investing world: You don't have to embrace big risk in order to see huge gains if you're willing to adopt a long-term approach. Consider that Microsoft stock delivered a total return of 1,200% over the last decade. The even less risky S&P 500 index posted a total return of roughly 300% across the same stretch, and it's likely that patient investors who back strong companies will continue to enjoy impressive returns.
With that in mind, a panel of Motley Fool contributors has identified three stocks that look poised to more than triple over the next decade. Read on to see why they think that these companies are on track to deliver big value for shareholders.
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The future of entertainment is interactive
Keith Noonan: Activision Blizzard (NASDAQ: ATVI) has played a huge role in shaping the evolution of the global video games industry, and the company stands out as one of the most likely candidates to benefit from growing demand for interactive entertainment. No other entertainment medium comes close to matching the levels of engagement recorded by top gaming titles, and leading players in the space will likely continue serving up big wins for shareholders.
With a market capitalization of roughly $71 billion, Activision Blizzard is hardly an industry upstart. Franchises including Call of Duty, World of Warcraft, and Candy Crush Saga stand out as category leaders and have helped the company deliver impressive performance in recent years, but the business still has avenues to huge growth over the long term.
The company boasts a player base of roughly 400 million users worldwide, but management anticipates that it can boost its audience to roughly a billion players around the globe. In addition to expanding its audience, Activision Blizzard should be able to take advantage of other new monetization opportunities.
Activision Blizzard has already found success in bridging some of its biggest franchises to the free-to-play (F2P) model. F2P games such as Call of Duty: Mobile and Call of Duty: Warzone have reached hundreds of millions of new players, and there's a good chance the company will be able to utilize this model to power better performance form other core properties. Even better, the gaming giant looks poised to capitalize on emerging opportunities in augmented reality, esports, in-game advertising, and e-commerce integration.
This is a great company operating at the intersection of powerful trends, and patient shareholders should see strong returns from the stock.
Netflix won't be the only new entrant to gaming -- that's huge for this pick-and-shovel play
Jason Hall: Recent news that streaming giant Netflix (NASDAQ: NFLX) was planning to enter the video game business has sent shockwaves through the industry. And while much of the attention has been on Netflix's ability to enter -- and potentially alter -- the hyper-competitive video game landscape, I think investors are missing the bigger opportunity to participate in what's likely to be a lot of companies gamifying some part of their business or customer experience.
That's what makes Unity Software (NYSE: U) so compelling as an investment. A "pick-and-shovel" company, Unity doesn't make games, but instead licenses software that developers and content creators use to build games, analytical tools, an advertising placement platform, and an in-app marketplace so its customers can maximize the economic potential of the content they create with Unity's tools.
It's certainly working, based on Unity's sales growth. When Unity reported Q1 results in May, CEO John Riccitiello pointed out that the 41% revenue growth in the quarter marked the 10th straight quarter of 30%-plus sales growth. Yet Mr. Market has lost some of his exuberance for Unity; shares are down almost 40% from their post-IPO peak in December:
Simply put, investors aren't thinking big enough about the potential applications for Unity's software and tools. The lines are getting blurred across different forms of entertainment, and the next decade could see Unity grow much bigger.
MercadoLibre is like investing in Amazon and PayPal a decade ago
Jamal Carnette: MercadoLibre (NASDAQ: MELI) is the most compelling growth stock in my entire portfolio. Imagine being able to go back in time to become an early Amazon or PayPal investor. That's MercadoLibre's opportunity and the company continues to fly under Wall Street's radar.
For those unfamiliar with MercadoLibre, it's Latin America's largest e-commerce company with operations in 18 countries. At 14% of total retail sales, e-commerce still has a long runway for growth in the developed U.S., so you can imagine the opportunity in developing Latin America. In 2020, the company posted revenue growth of 73% so it continues to take advantage of increased internet penetration and growth of disposable income across the region.
However, MercadoLibre's most compelling opportunity might not be e-commerce but rather its fintech payment product Mercado Pago. Like Amazon Web Services, Mercado Pago was initially conceived as a "dogfood" support product; here the limited goal was the facilitation of on-platform e-commerce transactions.
However, the product was so successful that it has migrated to off-platform uses like at grocery stores and gas stations. In the recently reported first-quarter results, nearly 60% of total payment volume for Mercado Pago was for off-platform applications.
The company has parlayed its success in payment services to offer additional banking services like its Mercado Credito lending and Mercado Fondo asset management. Disposable income and internet penetration will continue in the Latin American region and Mercado Libre is in a prime position to benefit.
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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. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Jamal Carnette, CFA owns shares of Amazon and MercadoLibre. Jason Hall owns shares of Activision Blizzard, MercadoLibre, and Unity Software Inc. Keith Noonan owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, MercadoLibre, Microsoft, Netflix, PayPal Holdings, and Unity Software Inc. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, and short January 2022 $1,940 calls on Amazon. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.