Recently, Matt Koppenheffer, my brother and current writer/analyst at The Motley Fool, offered up a challenge. He said, “Dave, someone needs to make a statement! Someone needs to prove to the millions, upon millions of people out there that anyone can become a successful investor.”
Okay, so maybe it wasn’t quite that dramatic, but regardless, the gauntlet had been thrown down! And I have accepted the challenge. Like Apollo Creed and Rocky Balboa before us my brother has vowed to train me on my quest of becoming a successful investor. And I, in return, have promised never to allow him to be beaten to death by a Russian.
What makes me so uniquely qualified to bear the torch as the People’s Investor? Good question, I’m glad I asked. I’m 24, so life hasn’t yet worn me down enough not to get excited about a new challenge. And I have a BS in Psychology, which means that, for one, I have research skills that could make a grown man cry. But, maybe more importantly, I have studied the myriad ways that people can be mistaken, biased, or just plain crazy. And from what little I’ve learned about investing thus far, people being just plain crazy seems to have a lot to do with what goes on in the stock market.
More important than what I do have, though, is what I don’t, and that’s experience. I have few, if any, preconceived notions about investing. I’m a ball of clay, prime for molding.
So I decided to start small. I’ll analyze, by my humble means, three companies. However, for the sake of fun I plan to do so by answering a “Foolish” question.
This week’s question:
Let’s take a look at some of the most popular publicly traded companies in the video game genre.
- Activision Blizzard, Inc. (NASDAQ:ATVI)
The first thing I’m looking for is stability. Though Activision Blizzard in its current form has been around since 2008, Activision itself was founded back in 1979. Video games have come a long way since 1979, but suffice it to say that Activision is no spring chicken.
Next, I want to be comfortable with – and be able to easily understand – how the company makes its money. As a game developer, Activision lives and dies to a large extent on what it’s able to produce. That said, while there is big potential – and big risk – that comes along with Activision cooking up hot new games, what’s great for investors is the solid foundation of key franchises it can keep milking like Call of Duty, Warcraft, and StarCraft.
Finally, as a bit of a cheapskate, I want to at least consider how much the company’s stock will cost. With the stock currently trading at just 13.5 times its last year’s profit, it certainly doesn’t seem like investors have to ante up to buy shares of Activision.