Hook 'Em While They're Young

Includes: ATVI, DIS, HAS, MAT
by: Scott MacDonald

Have you ever tried bringing up the stock market in casual conversation around friends and family? It's an odd experience. You are likely to get a variety of reactions. Some raised eyebrows, some crinkled foreheads, perhaps a tirade against big business or curiosity surrounding the mystery the market represents for most Americans. The average American knows next to nothing about the stock market and views it with a mix of suspicion, derision and awe. Many think of it as that place that rich people make their money. Others think of it as gambling but a lot less fun. Many don't even realize that they are stock owners themselves because they don't truly understand how their pension plans, 401K and IRAs work. I try to raise the collective financial IQ of those around me but I often feel like a door to door evangelist but instead of asking "have you been saved?" I ask "have you saved for retirement?"

Perhaps the lack of education is because our parents depended on company pension plans and social security to take care of them in retirement. They didn't need to know about the stock market so they simply don't have the knowledge to pass on. Unfortunately, the world has changed and company pension plans are nearly extinct and social security is on life support. Our education system reacts to the changing world about as well as the Titanic reacted to that iceberg. To make up for this education gap I applaud any knowledgeable financial writer for the grass roots effort to improve the financial IQs of those less informed but we need to start educating our children younger. College is too late. High school is too late. We need to get to these kids before they think they know everything (which is around 12 years old).

Teaching finance and stock market jargon to adults is difficult. It is difficult to make investing entertaining. For those of us that are interested in engaging our children in the investment world here is a list of stocks that may just be able to keep their interest and beat the market.

Walt Disney Company (NYSE:DIS) -

The Hook: Disney has something in their portfolio for everyone. Every kid knows about Disney World, knows the beloved characters and watches the TV shows but Disney can resonate with children (and Adults) of all ages. Disney isn't just about the cartoons and theme parks. Older kids might be interested in the fact that Disney also owns Pixar, Marvel, ABC television network or ESPN. Who wouldn't want to own a little piece of the magical world of Disney?

Why Buy?: Disney has had pretty good run up since October and appears to be fairly valued right now but if you goal is to teach your child about long term investing Disney as a great stock to own. It has a well-diversified portfolio, a 1.26% dividend yield and PE of 17 as I write this. It is a perfect fit for a college fund or retirement.


The Hook: Hasbro makes some of the coolest action figures on the planet, everything from transformers, GI Joe, Star Wars characters and an assortment of Marvel characters. The brand is far more than action figures though. They make toys for all ages and genders. If Hasbro toys don't hold your child's interest perhaps you can try Mattel (NASDAQ:MAT). Either way, having your child track a stock that's trademark is found throughout their toy box is a great way to keep their attention.

Why Buy?: I prefer Hasbro over Mattel personally and I am not alone. Hasbro has a dividend yield of 4.16% and is currently trading at a PE of 12.8. I think the real catalyst for the last half of this year will be Hasbro's dominance in the movie licensing business. With three huge movie releases packed into the late spring early summer (Avengers, Spider-Man, Dark Knight) Hasbro is likely to build steam all the way to Christmas.

Activision Blizzard Inc (NASDAQ:ATVI) -

The Hook: If your kid owns a computer or gaming console he has played one (or likely many) of the games from Activision's amazing franchises. Activision makes World of Warcraft, Call of Duty, Diablo and Starcraft among many other games. I know as a child my parents would buy me a big roll of paper and give me a pencil and I would draw my own videogame, each level, monster and obstacle. Every single one of them looked like a very poor version of the old Nintendo game Metroid. I wanted to be a video game developer. Well, that didn't work out for me and it won't work for most but you can show your child how to own a piece a great video game developer.

Why Buy?: Activision has a great stable of games. World of Warcraft is the largest Massive Multiplayer Online Role Playing Game that boasts over 10 million subscribers each paying $15 a month. This company has zero debt, a pocket full of cash and a steady dividend (1.45%). Instead of buying your son that new $60 video game he wants, why not pick up 5 shares of ATVI instead. He might even thank you for it (eventually).

Disclosure: I am long DIS, HAS.