Tag Archives: ATVI

Activision Blizzard (ATVI) is a Good Buy

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What’s Going On?

Activision Blizzard came out with their Q1 2018 earning reports exceeding estimates by over 10%. Despite Fortnite and PUBG claiming much gaming market share over that same period, it appears it hasn’t pushed people into abandoning their World of Warcraft subscriptions or uninstalling Call of Duty.

I’ve been a long time holder of this company, and do not plan on selling anytime soon. Even though the dividend rate is on the low side (34 cents this past quarter), their revenue climbed over 13% for the same quarter last year.

Potential trades:

Write (Sell) put option for June 22 at $70.5 dollars per share at $2.00 per option. As long as ATVI does not go below $68.5 by June 22, 2018 you will be better off for it. If the price goes below that point then you will be forced to buy shares at that price, which I still think is a good thing long term. Otherwise, I’d put this stock on a watchlist and buy long if the shares go under $69. With the volatile stock market of the past few months this will probably happen and give you a nice discount on a great company.

Current trading price of ATVI: $71.66

Other Thoughts

While EA Games is also a profitable company which looks good on paper, as a gamer myself I’d have to say that EA has thrown many gamers under the bus with their pay as you go, or pay for item strategy. It’s hard to imagine the frustration seeing items for sale in a game after you’ve already paid between $60 to $80 for a AAA game. EA Games helped create the in-game content purchase model, which unfortunately has spilt to other developers.

Invest in What You Understand

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I’ve talked to a lot of co-workers and relatives who have invested heavily in businesses they simply don’t understand. This is a mistake.

You don’t have to know everything there is to know about a company to invest in it, but you should have a general understanding of their products and market. Warren Buffet famously invested in Coca-Cola since 1987 and currently owns around 10% of Coke stocks. He loved this company because of its iconic name, and well known product. He found a company he knew and understood and was able to make sizable returns on his investment. Coke stocks went up from $2.45 per share in 1988 to it’s current price of $47.38, paying good dividends along the way. Walmart, Best Buy, and Kroger are all publicly listed companies that any average Joe can understand.

Walmart 5 year return: 72.5%

Best Buy 5 year return: 490.8%

Kroger 5 year return: 132.7%

If you’re a gamer you know names like Activision Blizzard, responsible for games such as World of Warcraft, Call of Duty, etc. which all have their own cult following. If you bought this company 5 years ago and held it you would return 555% on your investment. Walmart and Kroger are included as examples of companies that have stiff price competition and do not have an “economic moat” such as a company like Activision Blizzard. Best Buy has been a go-to place for electronics and has been well positioned to capture what I call the Apple Tech revolution, not having to deal with rivals that have gone under such as Circuit City and Ultimate Electronics.

Now companies that you don’t understand, stay away from! For example, “exploratory mining companies”, small no-name drug companies, and Greek shipping companies are all stock investor pitfalls that usually end up going bankrupt. This is why for all of my serious investments I make sure the company has at least a 400 million market capitalization. You can certainly play with penny stocks, but I’d never suggest putting any amount you can’t lose into them. It’s my same advise with gambling at a casino.

Now you may be asking, “I knew Circuit City and their products, but those lost money!”. You’re right! Besides knowing the business you also have to do some research on the company’s cash flow and growth. Those are outside the scope of this article, as the “secret sauce” for successful investors is largely dependant on their cash flow figures in comparison with this stocks outstanding and stock price.