Build Your Kid's Future With These 3 Stocks

Back-to-school season is officially underway. But while we're busy outfitting our kids with essential school supplies like books and pencils, we sometimes forget about another must this season: saving for our children's college education.

Laying the foundation
College costs for today's newborn will run nearly a quarter-million dollars. Higher-education costs have historically increased at least 5% annually and show no sign of slowing. But don't let the escalating cost of college discourage you. Instead, outpace those costs by investing in growth-oriented stocks. Then let the power of compounding growth work for you.

Here are three companies that can help you build a solid foundation for your child's future.

Whole Foods Market (NASDAQ: WFM  )

Whole Foods store interior. Source: Wikimedia Commons.

John Mackey, Whole Foods' co-founder and co-CEO, identified the organic-food movement more than three decades ago. Since that time, the nation's first coast-to-coast certified organic grocer has grown to a $20 billion retailer with a presence in three countries. Organic-food sales growth is outpacing the rate for all food sales, and that trend is expected to continue.

While Whole Foods is continually recognized for doing good deeds for its employees (it's been named one of Fortune's "100 Best Companies to Work For" in America every year since the list's 1998 inception), the retailer has also done right by its shareholders. It has grown same-stores sales and boasts a cornucopia of domestic and international expansion opportunities.

PetSmart (NASDAQ: PETM  )

Source: Wikimedia Commons.

Pet ownership is growing by leaps and bounds, with industry sales currently near $60 billion and expected to top $74 billion by 2015. Nearly two-thirds of U.S. households own a pet. We have huge emotional connections to our pets, and we're treating (and spending on) them them like members of our families.

Besides boasting strong industry growth, PetSmart has grown its net sales an average of 9% annually during the past five years. Same-store sales were up 6.3% in 2012. The pet-centric retailer's focus is on differentiating itself through its services, which include grooming, training, and boarding. As North America's largest provider of pet services, PetSmart's services sales have increased more than 60% in the past five years. And with stores only in the U.S., Canada, and Puerto Rico, the retailer hasn't even come close to marking its territory internationally.

Disney (NYSE: DIS  )

Source: Wikimedia Commons.

Mickey's massive empire, which includes a monolithic brand, theme parks, movies, and television, yields a diversified stream of revenues. The company's successful Lucasfilm, Marvel, and Pixar acquisitions are generating franchises and assets that will likely create shareholder value for many years to come. Disney's oft overlooked cable networks account for almost half the company's revenue and two-thirds of operating profit. Disney's return on investment and return on assets both dwarf the industry average.

Invest for the long haul
In the blink-of-an-eye 18-year period during which your newborn could have grown to a college dorm dweller, Whole Foods, PetSmart, and Disney have returned a wildly impressive 4,013%, 456%, and 295%, respectively, to shareholders. Of course, these stocks may not grow at the same rate in the coming 18 years, but even if they perform half so well as they did, that would put your kid's savings at the head of the class.

Do you want another stock idea that's as brilliant as your child? Our Motley Fool chief investment officer has done the homework for you. Read about the one stock he has given high marks and dubbed "The Motley Fool's Top Stock for 2013." Just click here to access the free report and find out the name of this under-the-radar company.


Read/Post Comments (5) | Recommend This Article (5)

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  • Report this Comment On August 20, 2013, at 11:14 AM, sagitarius84 wrote:

    I do like Disney as a company, but I do not like that they pay such a low amount of earnings and do not raise dividends every year..

  • Report this Comment On August 20, 2013, at 7:37 PM, jordanwi wrote:

    ^shouldn't a low payout ration be a positive, not a negative?

  • Report this Comment On August 21, 2013, at 12:20 AM, SuntanIronMan wrote:

    There is a balance to be had. But at about a 23% payout ratio, they could easily double their dividend and still have good margin of safety.

  • Report this Comment On August 21, 2013, at 4:13 AM, JeffParrel wrote:

    Aluminum is an interesting commodity because it can be recycled repeatedly without losing quality and has unique characteristics that make it ideal for many industries.

    Alcoa (AA) will succeed in the three-month time horizon.

    http://seekingalpha.com/article/1645342-alcoa-and-the-future...

  • Report this Comment On August 21, 2013, at 8:12 PM, KombatKarl wrote:

    What's the best vehicle to do this? Seems like you have to make a real killing to make up for the loss of the tax benefits you get with a 529.

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