Loverboy’s hit song “Everybody’s Working for the Weekend” was right on the money. I believe that recreation, in addition to food and shelter, is one of the reasons that a majority of the U.S. population (including myself) spends approximately one-third of their lives working. Even with the dismal state of the economy, most individuals are willing to spend a significant amount of money on some sort of recreation for themselves and their families. For this reason, I believe that the entertainment/recreation industry is an industry that every investor should dedicate a portion of their portfolios to.
Fun opportunities
Activision Blizzard, Inc. (NASDAQ:ATVI) created some of the most successful gaming products that money can buy, including Call of Duty, World of Warcraft, Diablo, Starcraft, and Skylanders. These brands are among the highest quality and most popular gaming products available today.
Skylanders is a potential game-changer for Activision Blizzard, Inc. (NASDAQ:ATVI). In addition to releasing this very successful game for kids, Activision Blizzard has also had enormous success in Skylander toy sales, since toys are actually a part of the game. The Skylanders are a large number of characters with individual personalities that have varying capabilities, strengths, and weaknesses.
Activision Blizzard, Inc. (NASDAQ:ATVI) has been very successful in the massively multiplayer online role-playing game category (MMORPG). This gaming format allows players to interact and compete with one another online. In fact, they are in the process of developing a next generation version of MMO games and are working towards a release in 2016.
Activision Blizzard, Inc. (NASDAQ:ATVI)’s financial results have been excellent with sales over the last decade increasing from $948 million to $4.9 billion and earnings increasing from $74 million to $1.1 billion. Activision Blizzard initialized a dividend program in 2010 and has since increased its payout for three consecutive years.
Some investors believe that Activision Blizzard, Inc. (NASDAQ:ATVI) will be hurt severely by competition, such as free gaming products and The Walt Disney Company (NYSE:DIS) proposed release of a gaming product that will compete directly with Skylanders. However, I believe that Activision Blizzard is positioned to create the highest quality gaming products that will continue to attract a very large number of die-hard gamers.
The Walt Disney Company (NYSE:DIS) is an entertainment and media powerhouse that created and owns a large number of the world’s most popular animated character brands including Cinderella, Snow White, and Mickey Mouse. In addition, due to its acquisitions of Marvel Entertainment and Lucasfilm, Disney now owns a large number of additional intellectual properties such as X-Men, the Incredible Hulk, and an enormous number of Star Wars characters. Disney’s proposed release of a new gaming product called Disney Infinity will feature all of their characters and is designed to compete with Activision Blizzard’s Skylanders.
The Walt Disney Company (NYSE:DIS) Studios has released hundreds of very successful movies, beginning with their initial release of Snow White and the Seven Dwarfs in 1937. Recent successful releases include Brave, Wreck-It-Ralph, Tangled, The Avengers, Secretariat, and Cars. I believe that Disney’s success in the movie industry will continue and that the number of Disney blockbusters will accelerate in the upcoming years, especially after considering the numerous movie possibilities with Marvel and Star Wars.
Disney owns and operates a wide variety of media networks, including ABC, the Disney Channel, and ESPN. ABC’s successful programming efforts include many top series and shows including Grey’s Anatomy, Modern Family, Once Upon a Time, and Good Morning America. The Disney Channel was the top rated network in 2012 for kids between age 2-11, and ESPN is the world’s undisputed leader in sports programming. In addition, all of these offer excellent advertising opportunities for Disney’s movie releases.
Disney’s parks and resorts segment includes the The Walt Disney Company (NYSE:DIS) World Resort in Orlando, Florida, the Disneyland Resort in Anaheim, California, and Aulani, a Disney Resort and Spa, which is an oceanfront property in Oahu, Hawaii. These resorts provide Disney with a wide variety of revenue resources including admission costs, toy sales, hotels, and recreational facilities such as golf courses.
Disney continues to successfully expand in international markets. There are currently 108 Disney Channels around the world available in 34 languages. Also, Disney owns interests in several international properties, such as the Hong Kong Disneyland and Disneyland Paris.
Disney’s sales have increased from $27.1 billion to $42.3 billion over the last decade and earnings have increased from $1.3 billion to $5.7 billion. Disney’s dividend has grown by 260% over the last decade and currently yields 1.2%. With a payout ratio of only 18%, their dividend growth should continue well into the future.
The Walt Disney Company (NYSE:DIS) is indeed magical, and I consider it to be an excellent entertainment company to invest in for the long term.
Polaris Industries Inc. (NYSE:PII) is a global provider of recreational vehicles that include motorcycles, snowmobiles, ATVs, and electric vehicles.
Polaris’s wide range of high-quality recreational brands include the Ranger, RZR, and Sportsman ATV products, Victory and Indian Motorcycles, and Rush, Switchback, RMK, and Indy Snowmobiles. Polaris Industries Inc. (NYSE:PII) also sells commercial and defense ATV models. The recent acquisitions of AIXAM Mega and Global Electric Vehicles has enabled Polaris to become a player in the small electric vehicle market.
Polaris is the largest player in the recreational vehicle industry with 35% of total sales. Their closest competitor, Honda Motor Co Ltd (ADR) (NYSE:HMC), is the second largest with approximately 15%, which is impressive since their main focus is on cars and trucks. In addition, Honda Motor Co Ltd (ADR) (NYSE:HMC)’s businesses include generators and marine products. Even though I consider Honda to be an excellent investment opportunity due to its wide range of products, I believe that Polaris will continue to be the top dog in the recreational vehicle industry.
Polaris has been hitting on all cylinders lately due to its powerful brands and successful acquisitions. 2012 revenues increased by 21% and 2012 earnings increased by 37%. Polaris’s dividend growth has been impressive. Its dividend currently yields 1.8% and with a payout ratio of only 32%, I believe that Polaris will continue its impressive dividend growth.
The Foolish bottom line
As the economy slowly recovers and the global population increases, I believe that the recreation industry will continue to provide a great investment opportunity for the long term and that Activision Blizzard, Disney, and Polaris would make great additions to a diversified, well-managed portfolio.
Greg Williamson owns shares of Walt Disney, Activision Blizzard, and Polaris Industries. The Motley Fool recommends Activision Blizzard, Polaris Industries, and Walt Disney. The Motley Fool owns shares of Activision Blizzard and Walt Disney.
The article Fun Investment Opportunities! originally appeared on Fool.com and is written by Greg Williamson.
Greg is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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