Digital Marketing Company Names

7 Stocks for a Kid’s Stocking

7 Stocks for a Kid's Stocking
Written by publishing team

‘This is stock season?’ In fact, the holidays are a time when parents, grandparents, and others buy stocks for the kids in their lives, trying to get this youngster interested in a brand or product they know and exposing them to the basic concepts of investing and compounding, dividends, and what makes a stock go up and down.

For a few stocking ideas, we researched low-value US stocks by Morningstar stock ratings and compiled a list of some names that kids should be familiar with. (Some suggest that simply buying an all-market index fund, which will include several very well-known brands, is an excellent way to get kids to invest.)

While you may be tempted to buy shares of the companies that the young investor has been talking about, this may not be the right time to buy. Our analysts are currently finding the most value in these seven well-known names. Here’s what our analysts have to say about three companies on the list.

Mattel (mat)

  • Morningstar rating (as of December 15, 2021): ★★★★
  • Morningstar economic trench rating: Narrow
  • Mattel makes many toys that can be found in children’s bedrooms, including Barbie, Hot Wheels, Fisher-Price, American Girl Dolls, and Uno.

“Mattel continues to reap gains from its turnaround, achieving above-break-even operating margins starting in 2019 and set to reach 13% in 2021. We expect Mattel to produce further expansion of adjusted operating margin in the future, aided by its cost implementation $250 million savings program: Furthermore, the company’s shift to a lean capital strategy should introduce structurally lower capital and operating expenditures than in the past, supporting earnings growth while allowing investment in product innovation.

“We expect these investments to focus on scaling up the core brands (Barbie, Hot Wheels, Fisher-Price), winning licenses, and reducing time to market, which will support sales and market share growth in Mattel. A complementary digital plan, her focus On strategic relationships with Alphabet (Google)Ali Baba (Baba), and others, should help with brand visibility, which could prevent stock losses for their digital gaming peers. Over time, stronger brands can lead to higher gross margins caused by focusing on higher margin brands and improving retail inventory positions (shipments more in line with demand). We expect inventory levels to remain a key focus for management, as inventory liquidation and infiltration of inventory holding units of low-yield brands had a significant negative impact on Mattel’s performance throughout 2014-2018. Currently, Mattel is mitigating holiday supply chain issues through upstream inputs and downstream procurement as well as delivery efforts (more access to ports and shipping lanes).

“Mattel continues to be number one in toy marketing thanks to its well-known brands. We believe this has allowed them to reclaim key licensing relationships and win new ones (despicable me, Pixar), supporting positive sales growth. Historically, Mattel has owned some of the most popular toys in the industry, which can support consistent POS results with licensed product lines, maintaining stable brand ownership. Mattel’s market share and volume support Morningstar’s narrow economic rating, which continues to be constrained by low barriers to entry that force continuous innovation as peers converge in the traditionally high-return VC business.”

– Jamie M. Katz, Senior Equity Analyst

Post collectibles (Mail)

  • Morningstar rating (as of December 15, 2021): ★★★★
  • Morningstar economic ditch rating: None
  • Post Holdings makes foods that kids regularly enjoy, such as Fruity Pebbles, Chips Ahoy, and Honey Bunches of Oats.

“Post has a unique set of businesses. As the grains category has come under pressure, the company has diversified its revenue base by introducing categories that have been driving legacy business declines, such as eggs and protein-based food products. While these actions have deteriorated their The top streak has stabilized, we believe the competitive advantage is still a long way off.

“The grain business (42% of fiscal 2020 revenue) is declining (outside the pandemic) as consumers are moving away from processed foods high in sugar and carbs. Adding to the challenge, Post, the third largest player, has had to compete for ever-decreasing shelf space with General Mills is the market leader (GIS) and Kellogg (K). However, Post’s grain business is very profitable, with EBITDA margins around mid-20% and low-30% for US and European companies, respectively.

“The refrigerated segments (41%, with 24% food services and 17% retail) primarily comprised of eggs and potato products. While this business has more attractive growth prospects in cereals (growing 1% to 2% versus modest declines in cereals) ), it is difficult to differentiate between commodities, and therefore generally do not receive a price premium, and as a result, this business is of a relatively low margin (10% -12%) and does not offer the company a competitive advantage, in our view.

Post owns a majority stake in BellRing Brands (BRBR) (17%), which makes protein shakes, bars, and powders. The company has had low double digit growth and attractive operating margins (17%-18%). The Premier Protein brand accounts for more than 80% of this segment and shows signs of brand strength, but it wasn’t a big enough segment to justify Post’s trench rating. Post recently announced plans to reduce its stake in BellRing from 71% to no more than 20% in the first half of calendar year 2022, which will undoubtedly slow Post sales growth. While Post will likely use the proceeds to acquire other assets, we suspect Target won’t boast BellRing’s double-digit sales growth.”

– Rebecca Scheunemann, stock analyst

Bath and body works (BBWI)

  • Morningstar rating (as of December 15, 2021): ★★★★
  • Morningstar economic trench rating: Narrow
  • Lotions, body sprays, and candles are a staple among teens.

“We believe Bath and Body Works has gained a strong competitive advantage in the large addressable markets in which it operates. The company’s strong brand intangible assets support its leadership position across the shower and candle air freshener industries in recent years, enhanced by its rapid response to consumer trends. Quantitatively, the BBW’s narrow trench rating is boosted by a 31% average return on invested capital including the goodwill we expect the business to generate over the next decade, well ahead of the 8% weighted average cost estimate. capital.

“We believe the $71 billion bath, body and beauty industry, the $11 billion home fragrance market, and the $5 billion soap and sanitizer market continue to offer a significant number up given the $6.4 billion BBW 2020 sales mark. It has identified The company has a compelling pipeline of opportunities across existing and neighboring categories to reach new consumers and stimulate increased sales conversion in the future.For example, BBW can not only add expansive products such as spray hand sanitizer (and more recently, bar soap), but can also be divided into non-commercial categories. Penetrating like skin care and hair care.

“This robust set of opportunities should help BBW grow at a healthy pace of 7% through fiscal year 2022-25. We expect sales of $10 billion in 2025, which is based on average sales growth of 3% from North American stores, and 11% from a digital channel, 17% from international opportunities.This should be supported by increased engagement with the brand, with over 80% brand awareness for women in the 18-59 age group (and 60% of men in the Same group.) In the long run, operating margins should return to the low twenties (from a pandemic-induced peak of 28% in 2020) as the company cedes some volume gains from pandemic-related demand spikes like dining and travel, you should see BBW Strong demand trends ahead, with our projected growth outstripping the steady growth forecast (according to Euromonitor) for the beauty and personal care industry during 2020-24.”

– Jamie M. Katz, Senior Equity Analyst

About the author

publishing team