There are certain things that make you a better investor than your kids. You can probably make more sense of an SEC filing and you've got the incentive of big-money goals, including helping to pay for their college and funding your retirement. But your kids have an undeniable advantage: They've got time. Years and years to become better at investing as they grow their returns. We asked some of our top contributors for good stocks that would help get children interested in investing. Read what they had to say then get to work with your own little (and not so little) ones, putting them on a path toward financial strength.
Anders Bylund: I have three wonderful kids, aged 11 and below. They hardly know what a TV commercial is. Not because I don't let them watch TV, mind you. But we cut the cord on cable TV four years ago, and we haven't missed it. When my kids want to watch My Little Pony or Crash and Bernstein, they plop down on the couch and fire up Netflix (NASDAQ:NFLX).
The best way to get kids interested in investing is to connect to their daily life. "Buy what you know," as master investor Peter Lynch would say. I can think of no better way to do that than by introducing them to the long-term value of Netflix shares.
Netflix is a great choice for young investors for many reasons. For example:
- The kids already know what Netflix does, and can explain how it's better than several competitors. It's fun to see how Netflix makes money!
- In my view, the company is at the very beginning of a long and exciting growth story. My children will get to see Netflix growing into a global entertainment giant, up close and personal.
- This one's personal: I can dig into Netflix's business model in great detail, and have plenty of experience with explaining this company in simple terms. In good times and in bad, I'm uniquely equipped to keep my kids up to date with how Netflix is doing.
That's why Netflix is the perfect stock for my kids. Your mileage may vary.
Tim Beyers: What kid doesn't want to go to the movies? All the great action flicks have at least some widescreen appeal. Heck, the new Star Wars is going to be partially shot in the format. The bigger deal, of course, is that cinema -- especially premium cinema -- has expanded well beyond our borders. IMAX (NYSE:IMAX) is well-positioned to cash in on the effort.
China is a particularly important territory since premium formats are proving to be popular there. Last year, Iron Man 3 opened to a record $21.1 million. Captain America: The Winter Soldier needed just 17 days to earn over $100 million at Chinese cinemas. These sorts of blockbuster box offices are key for IMAX, which is moving a joint-revenue sharing model whereby theaters agree to share profits on big-ticket films in exchange for use of IMAX screening equipment. In China, 85 of the company's 150 outfitted theaters are subject to some sort of joint revenue-sharing agreement.
And if all that weren't enough, what makes this stock most appropriate for kids is that it's a multi-decade growth story. Most filmmakers are supplementing films shot in normal format with a few IMAX add-ins. It won't stay that way forever. As more theaters get the IMAX treatment -- and as the costs of cameras comes down -- filmmakers will be inclined to make better (and more consistent) use of the format. When that day arrives, it'll change the moviegoing experience. And with it, the fortunes of IMAX investors who arrived early and stayed through the end credits.
Tamara Walsh: Walt Disney Company (NYSE:DIS) is one of the best stocks for kids because they can relate to the company's products and characters. This is also a great way to get them interested in investing because they will be proud to own part of Disney.
Most kids grow up going to Disney World, watching Disney movies, and buying Disney merchandise. Therefore, why not take a cut of the profits by owning the company's shares? The stock currently trades at around $88 a share, which is near the high end of its 52-week range. However, since investing for kids also means investing for the long haul, Disney is a smart pick because it should continue to reward shareholders for many years to come. It also pays a modest dividend of $0.86 per share annually, with a dividend yield of 0.98% today.
While that may seem insignificant at a glance, the payout will compound over time. Ultimately, this is a company with some of the most recognizable franchises on the planet -- think Star Wars, Cinderella, or even its recent smash hit Frozen. These brands should generate mounds of cash for Disney through merchandising and licensing deals for many years into the future. To that end, your kids will be proud to own this stock well into adulthood.
In fact, The Container Store wants to organize everything from your books to your sneakers to your life. As its founder and CEO Kip Tindell says, "There's a zen quality to being organized. It makes you feel better." Hopefully that means straight "A" report cards, too.
Tindell also believes his employees feel better if they're treated well. Compared to other retailers, his company pays nearly double the industry average. Competitive benefits and extensive training keep employees happy in their jobs: Turnover is low at only 5.7%. No wonder it's been on Fortune magazine's list of "Best Companies to Work For" for 15 years!
I find this company "Foolish" because it's planning for a distant future and being honest about its growing pains. Yes, Tindell admits stores like his are currently in a "retail funk," but he's not blaming the weather. And it's true the stock has dropped 51% from its recent high, but I think the market's preoccupied by short-term hiccups.
Piece by piece, The Container Store is putting together a puzzle. It's hiring good people, keeping them motivated, finding prime real estate, and exerting some pricing power (gross margins beat its competitors at 59%). In time, it can grow from 66 stores to 300 in the U.S. alone. If I were a youngster, I'd put this stock in my shopping cart.
Anders Bylund owns shares of Netflix and Walt Disney. Isaac Pino, CPA owns shares of The Container Store Group. Tamara Rutter owns shares of Netflix and Walt Disney. Tim Beyers owns shares of Netflix and Walt Disney. The Motley Fool recommends Imax, Netflix, The Container Store Group, and Walt Disney. The Motley Fool owns shares of Imax, Netflix, The Container Store Group, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.