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The Gift That Keeps on Giving

In the Christmas spirit, let's talk about giving. There are not many gifts that keep on giving for years on end. Kids outgrow new bikes, dolls get dusty in the corner, but stocks will keep giving. In this post we are going to talk about good stocks for a New Year's present, (considering I’m a little late for Christmas, or most other holidays). Here are my top 15 picks for a stock gifts for a child. Disclaimer, not all kids will know or love these companies so please choose the one that jumps your hurdles, not mine. Also, I will link all my previous articles about each metric on the bottom of this article.

Just to give you a taste of each company I will share a little bit about them and then you may look at the table I composed at the bottom. I chose each company because they are commonly known by most kids and for the most part not super risky. The table will show the metrics I value and the hurdles they have to jump to be considered. Not all hurdles have to be jumped, but they shouldn’t be too risky. Again, metrics I value may not be the same as yours.

Before I get started I want to touch on a word that I will mention many times, hurdles. Hurdles are what I call requirements that I want a stock to make while I’m considering them. I look at 5 main metrics, P/E Ratio, dividends, ROE, profit margins and debt. Each one has a hurdle or a requirement before I consider them. I do not believe that if a company misses a few hurdles they are bad, but it really depends on which ones.

Nike (NKE) is a very trendy shoe company. One key thing to know is the word trendy in investing lingo doesn’t tend to be good, it means that they try to ride the waves of the trends, sometimes they can not catch up. But, Nike is world renowned and has been for a while it is a safer bet because they tend to lead the trends instead of follow, but that doesn’t mean there aren’t competitors i.e. Under Armour, New Balance, etc.

Mattel (MAT) and Hasbro (HAS) are competing toy companies. Hasbro is geared more to boys and Mattel is gear more to girls, but they do provide for both genders. Hasbro makes toys like Nerf, Play-Doh, My Little Pony and Transformers, Mattel on the other hand, makes Barbies, American Girl Dolls, Polly Pockets, Hot Wheels and MatchBox.

Disney (DIS) as we all know has it’s own movies, princesses, and princes, but they also have clothes, toys, theme parks, Pixar and ESPN. They are a very successful company and most of their numbers reach my requirement.

Target (TGT)  is a very popular retail store. You can buy anything from groceries to new lamps there, but their debt is a concern.

Amazon (AMZN) is the new-ish online store. It is very helpful by getting your purchases to your houses in small amounts of time. They carry almost everything at reasonable or sometimes cheap prices, but that can be risky because sometimes that would mean losing or barely making money for their company and investors. This is an example of a stock that I would not invest in because its numbers are too far from the hurdle.

Starbucks (SBUX) is a classic chain coffee shop from the west coast, as is Dunkin’ Donuts (DNKN) from the east coast.  Dunkin’ Donuts is known equally for its donuts whereas Starbucks’ food is still a working progress. They tie in numbers so between these two you would really have to look at which metrics you value more. They tie because they both pass three metrics although, I would pick Dunkin’ Donuts because in the metrics they pass they do better in. For example, Dunkin’ Donuts’ Dividend Yield is 2.24% and Starbucks’ is 1.49%.

Kraft/Heinz (KHC) is a packaged food company. Together they make ketchup, Velveeta cheese, Jell-o, Planter's peanuts, Kool-Aid, and Lunchables.

Pepsi (PEP) and Coca-Cola (KO) are two competing companies. They both sell soda and other drinks. Pepsi makes Fritos, Pepsi, Lays chips, Quaker Oats, Aquafina, Tropicana, Cheetos and much more. Coca-Cola makes Sprite, Fanta, Coke, Vitaminwater, Minute Maid, Smartwater, and Dr. Pepper.

Hershey (HSY) and Nestle (NSRGY) are also competing companies. Nestle makes Nestea, Coffee-Mate, Nescafe, Perrier, Nespresso, Wonka candy, Laffy Taffy, Nerds, Gerber, KitKat and so much more. Hershey makes their famous Hershey chocolate bar, Reese Peanut Butter Cups, Twizzlers, Kisses, Jolly Rancher, Ice Breakers, and Rolo.

Last but not least is Kellogg (K). Kellogg makes packaged food like Cheez-its, Eggo waffles, Rice Krispie Treats, Frosted Flakes, Apple Jacks, and Rice Krispies.


Companies
Price to Earnings
20 or lower
Dividend Between 2-5%
Gross Margin 25% or higher
Return on Equity 15% or higher
Debt Less than 1.0
Nike
23.4
1.27%
45.7%
30.6%
0.2
Mattel
27.0
5.36%
48.0%
14.3%
0.9
Hasbro
18.6
2.54%
53.7%
32.5%
0.7
Disney
18.4
1.42%
46.1%
21.4%
0.4
Target
13.6
3.16%
29.9%
27.5%
1.1
Amazon
174.0
0%
34.6%
13.9%
0.5
Starbucks
30.0
1.49%
60.1%
48.2%
0.5
Kraft / Heinz
33.9
2.68%
35.6%
4.8%
0.5
Pepsi
23.0
2.82%
60.1%
51.2%
2.3
Coca-Cola
25.2
3.37%
60.6%
27.7%
1.2
Hershey
27.5
2.32%
44.3%
91.5%
2.6
Nestle
26.2
3.26%
50.3%
14.7%
0.2
Dunkin’ Donuts
37.5
2.24%
81.1%
0%
0
Kelloggs
37.0
2.77%
36.3%
29.1%
2.9
***All this data was arranged on December 25th, 2016 and will change daily, it comes from Morningstar. Also, the red coloring means that it missed the hurdle. Please still determine it for yourself.***

Lastly, I took a total score for each stock and I’m going to present the winner. Our winner is Hasbro. They passed the all of my hurdles and I understand the company that is why I am now giving them a crown, but almost no company here is bad and you should pick it for yourself.

Please click on the metric you are confuzzled by to learn more. Price to Earnings, dividend, gross margin, ROE, and debt.

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