You’ve saved $1,000 from your part-time job while going to school to get that college degree you’ve always wanted. You want to invest it. The question is where to safely put it so that it grows to be worth more than $1,000 in a few years. Do you look for stocks to buy? Do you purchase a simple fund-of-funds mutual fund or an exchange-traded fund? Or, do you put it in a high-interest savings account where the principal is guaranteed?
These are some of the possible ideas facing young investors unfamiliar with the options available to them.
To help you grow your hard-earned savings, I’ve put together a collection of seven ways you can hit the ground running in your pursuit of a suitable investment.
But remember this: The most important message I can give you is that the investment itself isn’t nearly as important as the amount of time your savings are in the market.
With all of that in mind, here are seven stocks to buy for young investors.
Electronic Arts (EA)
An essential part of investing is understanding why you own a particular stock. In the case of Electronic Arts (NASDAQ:EA), I’m recommending its stock for two reasons.
The first reason is that young people generally understand and play video games.
Electronic Arts is one of the world’s largest publishers of video games. In fiscal 2019, Electronic Arts had annual net revenues of $5 billion, operating cash flow of $1.5 billion and $1 billion in net income.
Highlights of fiscal 2019 include launching free-to-play game Apex Legends, repurchasing 11 million of its shares, and growing its net bookings by 5% to $3.7 billion.
Thanks to EA’s free-to-play franchise, analysts are high on EA stock.
On July 2, BMO Capital Markets analyst Gerrick Johnson raised its price target by $14 to $130, 30% higher than where it’s currently trading. A big reason for the rise in price has to do with the early hype for the second season of Apex Legends.
According to reports, more than three million views of the trailer for the second season were viewed in the first four days of its release with a 95% like-to-dislike ratio.
If you already play the games, why not own the stock?
Scotts Miracle-Grow (SMG)
As you’re likely to notice, all seven of these stocks are trading around $100. I chose to recommend stocks around this dollar amount so you could buy 10 shares of whichever stock you select.
As I write this, Scotts Miracle-Gro (NYSE:SMG) is trading just below $100.
If you’re not familiar with Scotts, it is in the business of making your lawn and gardens look fantastic. In business since 1868, it is North America’s leading company in the consumer lawn and garden industry with 2018 sales of $2.7 billion.
If you’re looking for a stable company, SMG is it, targeting 2-4% sales growth each year, 4.6% growth in operating income and 8-10% earnings-per-share growth, delivering 10-12% annual returns for shareholders.
In fiscal 2019, Scotts expects sales growth of at least 13% with non-GAAP EPS rising by at least 13% to $4.20.
Since 2014, Scotts has grown its free cash flow by 77% to $274 million in 2018, which means it has a free cash flow yield of 3.5% based on an enterprise value of $7.9 billion.
Furthermore, as the cannabis industry grows, Scotts’ Hawthorne Gardening subsidiary will continue to benefit from that growth. Owning SMG is an excellent way to make a side bet on the cannabis industry.
Columbia Sportswear (COLM)
You would think with the success of Canada Goose (NYSE:GOOS) in recent years that Columbia Sportswear (NASDAQ:COLM) would be suffering a sales outage. Not so. In fact, COLM stock is trading within 10% of its all-time high, which it hit in March.
However, the demand for warm outdoor wear continues to grow, leaving plenty of revenue for upstarts like Canada Goose and legacy brands such as Columbia and the North Face. Today, consumers expect their winter coats to be able to handle any weather, including frigid, sub-zero conditions.
“Consumers today expect technical attributes to their garments, and that means winter clothes should be able to function in extreme climates,” said Edward Hertzman, the founder and president of the trade publication Sourcing Journal in February. “It’s no longer a crazy idea for a T-shirt to be able to sweat-wick, have UV protection, or have cooling or moisture retention qualities. This technology already exists, and people expect it. Companies are just responding to consumer expectations.”
When you’re trying to meet these customer expectations, it helps that you’ve been around since 1938 as Columbia has. Consumers have grown to trust its products whose brands include Columbia, Sorel, prAna and Mountain Hardwear.
But make no mistake, the Columbia brand is what drives the company higher. In 2018, the Columbia brand accounted for 82% of the company’s overall revenue with the U.S. home to 62% of its total sales.
The opportunity, if you buy CLM stock, is its growth outside the U.S. for all four of its brands, including Columbia.
While COLM might not be nearly as trendy as GOOS, it trades at 2.5 times sales, almost three times less than Canada’s iconic brand.
To me, that spells value.
Nasdaq Inc. (NDAQ)
If you’re going to invest in U.S.-listed stocks, I believe it makes sense to own one or more of the companies that operate the stock exchanges where these seven stocks are bought and sold.
Naturally, Nasdaq Inc. (NASDAQ:NDAQ) is listed on Nasdaq, the stock exchange it’s owned since its creation in 1971. In 2007, Nasdaq merged with OMX, a Scandinavian company that launched the first derivative exchange in Europe, to become known as the Nasdaq OMX Group. In 2014, the company changed its name to Nasdaq Inc.
It continues to make acquisitions to grow Nasdaq Inc. beyond merely an operator of stock exchanges.
In the first quarter of 2019, Nasdaq continued its transition into the financial technology industry by acquiring Cinnober for $190 million. The Swedish company provides fintech services to financial institutions around the world through its TRADExpress Platform, which helps stock exchanges trade more efficiently.
In 2018, Nasdaq had $2.5 billion in revenues from five different revenue streams, with 70% of it recurring in nature through subscriptions. Over the past three years, it has grown its non-GAAP EPS by 12% annually from $3.39 in 2015 to $4.75 in 2018.
Friedman’s push to fintech and data analytics will reap dividends for years to come.
My objective with this article is to provide young investors with seven different options from seven different sectors, all trading around $100 a share. Medtronic (NYSE:MDT) fits the bill for the healthcare sector.
If you’re not familiar with Medtronic, it got its start in 1949 as a medical equipment repair shop. Since then, it has grown to become one of the world’s biggest and best manufacturers of medical devices.
Whether we’re talking insulin pumps, transcatheter heart valves, neurosurgery imaging and all the other medical technology it makes, Medtronic is a leader in its field.
In fiscal 2019, the company had $30.6 billion in sales divided among four main operating units: Restorative Therapies ($8.2 billion), Cardiac & Vascular ($11.5 billion), Minimally Invasive Therapies ($8.5 billion) and the Diabetes Group ($2.4 billion).
Each of these units in their own right would be a large company. By investing in Medtronic stock, investors get a significant diversification of revenue streams, along with a $2.16 annual dividend, which is currently yielding 2.2%.
In May, Medtronic announced fourth-quarter results that were better than expected. On the top line, it had sales of $8.15 billion, $30 million higher than the consensus estimate. On the bottom line, Medtronic’s non-GAAP EPS was $1.54, 7 cents better than analyst expectations.
As people continue to live longer, the demand for Medtronic’s products will increase, providing shareholders with above-average long-term returns.
Stanley Black & Decker (SWK)
Over the past 20 years, shareholders of Stanley Black & Decker (NYSE:SWK) have achieved an average annual total return of 10.6% through July 2. A $10,000 investment on July 6, 1999, is worth $75,436 today.
How does that compare to the S&P 500?
Well, if you use the SPDR S&P 500 ETF (NYSEARCA:SPY) as your proxy, it trounces the index by 450 basis points annually.
The company’s growth accelerated in 2009 when The Stanley Works merged with the Black & Decker Corporation to form one of the world’s largest tool companies.
A merger of equals, each share of Black & Decker stock was exchanged for 1.275 shares of Stanley common stock. The deal was valued at $4.5 billion with Stanley shareholders owning 50.5% of the merged entity — Stanley Black & Decker — and Black & Decker shareholders owning the rest.
At the time, the two companies rationalized the deal because of the $350 million in cost synergies, two highly complementary brands, and $1 in EPS accretion within three years of closing the merger.
Since the merger was completed on March 12, 2010, SWK stock is up 11.5% compounded annually through July 2.
Not wanting to miss out on the popularity of online shopping, SWK has focused on e-commerce in recent years, and it has paid off, going over $1 billion in sales in 2018. Although they only accounted for 7.2% of its $13.98 billion in 2018 revenue, its e-commerce revenues are growing at double digits.
Its omnichannel focus is critical to the success of SWK stock in the years to come.
Stocks to Buy: Hilton Worldwide (HLT)
If you’ve traveled at all, you’re likely familiar with the Hilton Hotels brand.
Two years ago, Hilton Worldwide (NYSE:HLT) wasn’t just an operator of hotels. It also owned hotels and a timeshare company. To extract greater value for its shareholders, the company decided to spin off Park Hotels & Resorts (NYSE:PK) and Hilton Grand Vacations (NYSE:HGV) into their own independent, publicly traded companies, so that each could focus on their segment of the travel market.
Of the three stocks, HLT had been the best performer since the split in January 2017.
Looking into the future, Hilton sees considerable growth for its all-suites brands — Embassy Suites, Homewood Suites, Home2 Suites — and that growth should help propel HLT higher in the next 12-24 months.
In the first quarter, Hilton opened 21 all-suites properties, it signed deals for another 37 and plans to open 130 by the end of 2019. The all-suites properties account for approximately 10% of Hilton’s total number of properties.
In addition to the 130, its opening for the all-suites division, Hilton has a total pipeline of 600 at the current time.
One country where Hilton is focusing its all-suites growth is Canada, where it continues to get record visitors combined with higher revenue per available room (RevPAR) and average daily rate (ADR). It recently opened its 30th all-suites hotel in Canada. It also sees potential in the Caribbean and Latin America.
Up more than 40% year to date, Hilton stock remains a great play heading into the summer season.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.