With five days left until Christmas, and visions of jam-packed stores driving you crazy, it might be time to think outside the box for a last-minute gift.
How about a stock? A few shares in a quality company with good growth prospects can be a good way to educate children about the stock market. And, unlike most gifts, the value of what you give might actually rise over time.
Generally, you need a brokerage account to own stocks. However, some U.S. websites will sell you single shares in selected American companies. Oneshare.com charges extra for a framed stock certificate, while giveashare.com will only sell a share bundled with a framed certificate.
The Canadian ShareOwner Investments Inc. will also allow you to buy as little as one share in some Canadian and U.S. stocks, although the recipient will need to open an account. You can also start an informal, in-trust account for a child.
Because the array of stocks can be overwhelming, we asked several fund managers for suggestions. For comparison, we’ve included more conventional gift ideas associated with the company.
Gift idea: iPod touch ($200 to $400) or an iPad ($520 to $720)
Stock alternative: Apple Inc.
Last price: $382.21 (U.S.) a share
The consumer electronics and computer maker is “one of the most solid growth stories in the market,” says Stephen Rogers of Horizons Investment Management Inc. The death of Apple co-founder Steve Jobs is not worrisome because Apple has already mapped out upgrades for its popular mobile devices over the next several years, he said. “The next big thing is the Apple TV, and there is speculation that it could be out as early as next year. The stock is incredibly cheap at 10 times forward earnings.”
Gift idea: Gift basket of gourmet coffee ($40 to $50)
Last price: $43.62 (U.S.)
The growth potential for this multinational coffeehouse chain is its aggressive push beyond cafés into other lucrative outlets such as grocery stores and offices, says Noah Blackstein of Goodman & Co. Investment Counsel Ltd. “They have launched the Starbucks K-cup [for Keurig coffee makers]to further their distribution into non-traditional outlets. Consumer products is a huge business of about $50-billion a year and they are not really in it.”
Gift idea: Hockey stick ($30 to $160 Canadian); portable power tools ($30 to $200); or 12-cup coffeemaker ($70 to $200)
Canadian Tire Corp.
Last price: $64.40
This general merchandiser is attractive because it sells goods that people will need even during a tough economy, says Marian Hoffmann of Sionna Investment Managers. While Canadian Tire owns clothing chain Mark’s Work Wearhouse and bought sporting goods retailer Forzani Group Ltd. in August, the company’s earnings have shown less cyclicality than some peers, she said. Its shares trade at 11 times trailing earnings – the low end of its historical trading range – because of concerns about an imminent assault on Canada by U.S. retailer Target Corp., she said. “We think that fear is overdone.”
Gift idea: Spa gift certificate ($30 to $220)
Hyatt Hotels Corp.
Last price: $34.89 (U.S.)
The U.S.-based luxury hotel operator has “great brands” such as Park Hyatt, Grand Hyatt and Hyatt Regency, but it hasn’t grown as quickly as some competitors, says Alan Mannik of Invesco Trimark Ltd. He sees a huge growth opportunity in Europe, where the chain has limited presence today. The region’s debt crisis and fears of an economic slowdown could create acquisition opportunities and encourage more independent hotel operators to become Hyatt franchisees, he added. Hyatt has a long-term focused management team and a strong balance sheet, while its stock trades reasonably at 1.2 times book value, he said.
Gift idea: Season’s pass to an amusement park ($37 to $60 at Montreal’s La Ronde)
Six Flags Entertainment Corp.
Last price: $37.48 (U.S.)
The North American operator of amusement parks attracts 24 million visitors annually who go for a “cheap vacation,” says Larry Sarbit of Sarbit Advisory Services Inc. “It doesn’t matter what the economy looks like. People want a break and still have fun.” The company exited from bankruptcy protection last year after struggling with a huge debt load during the recession, but has since pared those loans substantially, he said. The stock, which also provides a small dividend, trades at 10 times next year’s free cash so “that is cheap, and you have a bunch of insiders buying the stock,” which is a good sign, he added.