Investing in stocks for your children is a smart way to save up for their college expenses, business ventures or any other financial need. And by investing early, kids will learn the concepts of finance and value of money better.
Big brand stocks are a wise choice here as kids find such names relatable. Moreover, big brand companies have established business models and tend to draw consumer and investor attention even when the equity market is choppy. These stocks generally boast stable cash flow, and being big brands, consumers have confidence in their products’ quality, durability and consistency. We are thus suggesting the following solid branded stocks that are great long-term investment choices for a child’s portfolio.
Our first pick is Apple Inc. AAPL because of its enormous brand recognition. Its products are not only used daily but are also vital for our daily activities
Apple is known for creating huge wealth for its shareholders. Notably, the iPhone maker returned almost $25 billion to shareholders in its last reported quarter, which included $20 billion in share buybacks and $3.5 billion in dividends. Buybacks, by the way, boost earnings per share, leading to an uptick in the share price. In fact, over the past 12 months, Apple has repurchased $81 billion worth of shares. What’s more impressive is that the company has huge amount of cash, which can be easily used for operations, R&D activities and planned acquisitions.
In the meantime, the coronavirus outbreak in China has affected Apple in several ways. The company had to close an array of stores in China and many of the iPhone maker’s suppliers have been asked to halt production.
But let’s admit, Apple is doing just fine. The month of February anyhow doesn’t see high iPhone sales. And since iPhone is a big-ticket purchase, any drop in sales in February gets compensated in March and April. Moreover, iPhone launches are mostly slated for the end of a year. And by 2020-end, the outbreak should be a thing of the past.
Nonetheless, Apple has witnessed an uptick in the sales of smartwatches, AirPods wireless earbuds and services like mobile payments and streaming-music subscriptions of late. Growth in such segments helped Apple offset an almost 14% decline in its iPhone business last year, which accounts for the bulk of its sales.
Services, in the meantime, has become the second-most important division for Apple. After all, more than 450 million customers are buying the company’s streaming content, news and warranties. Apple earned a staggering $46 billion from the segment last year, which accounted for 18% of its overall sales. Apple is also benefitting from the strong adoption of Apple Pay and expanding Apple Music subscriber base.
Apple currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has moved up 4.4% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 11.8% and 14.8%, respectively. In the next five years, the company’s projected earnings growth rate is 10.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Walt Disney Company DIS is one of the world’s largest entertainment companies and is especially popular among kids. Universally known as the house of mouse, Disney is known for its Marvel, Pixar, and Lucasfilm; TV networks like ESPN, Fox’s media assets, theme parks and, streaming platforms like Disney+, ESPN+, and Hulu.
It’s worth pointing out that an investment of $1,000 in Disney back in 1957 when it went public will now value $3.9 million.
Moreover, Disney’s initiative to produce new movies for generations to come and building attractive parks for kids across the globe will certainly fuel growth over the next five decades. Notably, Disney+ has already gained 6.5 million paid subscribers since its launch last November and is well poised to gain traction in the long run.
Lastly, the acquisition of majority of Fox’s assets, launch of direct-to-consumer service and robust visitor growth rate are key catalysts. Disney currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has moved 0.7% north over the past 60 days. The company’s expected earnings growth rate for the next year is 20.6%. In fact, in the next five years, the company’s projected earnings growth rate is 5.1%.
Another top brand that a child is familiar with is Microsoft Corporation MSFT. Its share prices are much poised to scale up and that’s mostly because of the growth in Intelligent Cloud.
In second-quarter fiscal 2020, the company saw Intelligent Cloud grow a healthy 27% quarter over quarter. What’s more, over a year, Microsoft has generated $43.76 billion worth of revenues from its Intelligent Cloud offering. And during the same period, Azure grew 62%, largely boosting overall growth of the segment.
To top it, Microsoft’s gaming segment, including Xbox Live, Game Pass subscriptions and Mixer, drove the trillion-dollar-plus company. Acquisitions like that of PlayFab and GitHub helped Microsoft expand its total addressable market. Lastly, securing of the 10-year, $10 billion Joint Enterprise Defense Infrastructure project from the Department of Defense bodes well.
Microsoft currently sports a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings has climbed 5.4% over the past 60 days. The company’s expected earnings growth rate for the current quarter and year is 16.7% and 18.7%, respectively. In the next five years, the company’s projected earnings growth rate is 13.2%.
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Last year, it generated $24 billion in global revenues. By 2020, it’s predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce “”the world’s first trillionaires,”” but that should still leave plenty of money for regular investors who make the right trades early.
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