Christmas is almost here, and hopefully most parents have finished their holiday shopping for the kids. 24/7 Wall St. wanted to take the lesson of investing to youngsters, via their parents’ pocketbooks and efforts, of course. Getting physical delivery of shares of stocks is no longer that common, but a trading statement for shares of stocks can perhaps be a great stocking stuffer for your kids.
Obviously this is far from cheap, because it can cost close to a small fortune to buy even one share of some great companies. Using the Peter Lynch investment model of buying companies with products you know and use may be the easiest way to teach youngsters about saving and investing for the next generation.
Of course, considering a company as an investment requires fundamental analysis. Parents can teach their kids about judging a company’s future prospects rather than just looking into the past successes. Kids also can end up in a crash course on how to evaluate companies in this manner.
24/7 Wall St. considered many companies for this exercise, and the list of stocks recommended for kids at the end of 2013 may be entirely different at the end of 2014. Some of the great companies are simply too expensive in share price or in valuation to make sense for young, would-be investors. Market conditions and valuations can change drastically, but the focus of sticking with known products and companies is a lesson that should never go away.
There are many lessons to learn here, and we singled out what we considered would be a great lesson in each investment. Perhaps the greatest lesson that can be taught at an early age is that not all investments make money. Sometimes the timing is just as important as the fundamentals of a company.
Apple Inc. (NASDAQ: AAPL) still has the love of the youngsters. They just do not flock to Windows now, although the cheaper anti-Windows consumer product may be Android. Apple now trades at less than $550, after having hit just over $700 at its absolute peak. This is a case where the stock looks cheap on the surface, at only about 13 times forward earnings, but it also is a good lesson for the youngsters. Outside of having to save and save and only be able to buy one or two shares, the lesson here is that a company has to keep innovating. If not, well you have already seen what can happen when a major growth story turns into a value stock after becoming the largest company by market cap.
Five Below Inc. (NASDAQ: FIVE) is a store based on the modern-day dollar store theme but targeted on the younger crowd. Being frugal and sensible with products in the $1 to $5 range may be a good lesson for living within the means of an allowance. Could this help teach kids to live within their means when they grow up? Another good lesson here is the “regional to national” story. The company has fewer than 300 stores, and many cities still do not even have a Five Below store yet. Its shares are trading around $43, and the consensus analyst price target is above $49. The stock did incredibly well after its 2012 initial public offering, and it peaked at about $55 before coming back down to earth. Five Below wants to grow its footprint by another 50% or so in the next couple of years, but at 43 times future earnings it also offers a lesson that you sometimes have to pay up handily for growth.
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