In this article, we discuss the 10 best stocks to buy for grandchildren. To skip the detailed analysis of financial markets and analysts’ outlook, go directly to the 5 Best Stocks To Buy For Grandchildren.
The world held its breath for almost three years as the global financial markets and economy suffered from one shock after another. The bears were sure that the US economy would be hit by a recession in 2023 or 2024, but the market proved all their predictions wrong and made an impressive comeback on the back of artificial intelligence (AI).
While the bulls are quite optimistic about the future, there are still concerns regarding a soft landing or a mild recession. A JPMorgan report points out that there are indications of slowing growth in the current year but not a total collapse and still holds the belief that a mild recession could take place in the next year. The report states:
“The challenge for investors: the damage to public sector finances from mega-deficits, markets that already price in a very soft landing and the concentrated contribution of megacap stocks. In 2023, S&P 500 earnings were flat; they were up 33% for the 7 megacap stocks and down 5% across the rest of the S&P 500. All things considered, 2024 looks like a year of slowing GDP growth, single-digit earnings growth and single-digit returns on the median S&P 500 stock.”
On a global scale, the International Monetary Fund’s (IMF) January 2024 World Economic Outlook (WEO) report also contains revisions regarding the IMF’s October 2023 predictions and states that the global growth is expected to be 3.1% in 2024, up 0.2% from the IMF’s October predictions. The IMF predicts a 3.2% growth in 2025. Furthermore, it is believed that global headline inflation is expected to fall by 5.8% in the current year and 4.4% in 2025.
In this economic environment and volatility, millions of American families would wonder how they could help their children and grandchildren secure their financial future. One of the best ways to do that would be to teach them money management. According to the Wall Street legend, Warren Buffett, sometimes parents start teaching financial literacy to their children later than they should. He said:
“Whether it’s teaching kids the value of a dollar, the difference between needs and wants or the value of saving — these are all concepts that kids encounter at a very early age, so it’s best to help them to understand it.”
Buying stocks for your children or grandchildren is also a good way to secure their financial future. Value stocks are some of the best options when looking at long-term investments. They are stocks of companies that are considered to be undervalued compared to their intrinsic value or potential for growth. Value stocks have also been endorsed by Wharton School Professor of Finance Jeremy Siegel for the current year. In a CNBC interview, he mentioned the abnormal gap between the price-to-earnings (PE) ratio of the Russell 1000 Growth and Russell 1000 Value. Based on that, he predicts a 15% gain in value stocks in 2024. Additionally, the best stocks to buy for grandchildren could include stocks with healthy long-term dividends.
A close-up of the NASDAQ ticker board displaying the stock increase of a Dallas-based company.
Our Methodology
For this article, we took a look at our article, 12 Best Long-Term Investments for a Child, and checked the portfolio composition of all the ETFs and index funds mentioned in it. Next, we chose the 10 most commonly found stocks in these fund’s top 10 holdings.
The stocks are listed in ascending order of their hedge fund sentiment as of the fourth quarter of 2023. The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
Best Stocks To Buy For Grandchildren
10. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 82
Tesla, Inc. (NASDAQ:TSLA) is an American automotive and clean energy company. It is the pioneer of electric vehicles in the United States. Tesla, Inc. (NASDAQ:TSLA) is headquartered in Texas.
On February 15, Cathie Wood’s ARK Invest bought around 14,500 shares of Tesla, Inc. (NASDAQ:TSLA). In a CNBC interview, Wood predicted a reacceleration in growth and a huge increase in margins for the company within the next couple of years due to autonomous taxi networks.
In the fourth quarter of 2023, Philippe Laffont’s Coatue Management was the largest shareholder of Tesla, Inc. (NASDAQ:TSLA), with over 4 million shares worth $1 billion.
Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META) are some of the best stocks to buy for grandchildren, along with Tesla, Inc. (NASDAQ:TSLA).
9. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 91
Broadcom Inc. (NASDAQ:AVGO) is an American semiconductor and infrastructure software products company. A major chunk of the company’s revenue comes from its semiconductor-based products. Broadcom Inc. (NASDAQ:AVGO) is headquartered in California.
On January 19, Goldman Sachs reinstated its Buy rating on Broadcom Inc. (NASDAQ:AVGO) and mentioned that it expects a double-digit revenue growth for its AI-related business. The firm has a price target of $1325 for the company.
Broadcom Inc. (NASDAQ:AVGO)’s stock was owned by 91 hedge funds in the fourth quarter of 2023.
ClearBridge Multi Cap Growth Strategy made the following comment about Broadcom Inc. (NASDAQ:AVGO) in its Q2 2023 investor letter:
“While the ClearBridge Multi Cap Growth Strategy has limited mega cap exposure, which has been a recent headwind to relative performance, we own several companies that stand to benefit from the explosive growth in generative AI. These holdings play key roles in building out the necessary infrastructure and helping customers leverage capabilities enabled by this emerging technology.
Semiconductor and software solutions provider Broadcom Inc. (NASDAQ:AVGO), for example, is an important supplier of networking chips that power ethernet switches and routers for connectivity between AI servers. The company sees quarterly revenue from this part of their business exceeding $1 billion in their fiscal third quarter, on a trajectory toward doubling over the course of the year.”
8. Eli Lilly and Company (NYSE:LLY)
Number of Hedge Fund Holders: 102
Eli Lilly and Company (NYSE:LLY) is one of the oldest and largest pharmaceutical companies in the world. The company is headquartered in Indiana, U.S., and sells its products in around 125 countries.
On February 16, Morgan Stanley analyst Terence Flynn increased its price target on Eli Lilly and Company (NYSE:LLY)’s stock to $950 from $805 and kept an Overweight rating on the shares. As of the February 28 market close, the company’s stock is up over 27.94% year-to-date.
Eli Lilly and Company (NYSE:LLY) ranks 8th on our list of best stocks to buy from grandchildren.
Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its fourth quarter 2023 investor letter:
“Stock selection was also positive in the sub-industry owing to strong gains from therapeutics-focused pharmaceutical giant Eli Lilly and Company (NYSE:LLY). Lilly’s stock continued to outperform driven by strong sales of blockbuster diabetes medicine Mounjaro and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises, particularly after Novo Nordisk released its SELECT trial results showing a 20% relative risk reduction in overweight patients with cardiovascular disease and no prior history of diabetes.
Eli Lilly and Company is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to strong third quarter sales of blockbuster diabetes medicine Mounjaro and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.
We own Eli Lilly and Company, which we believe will remain a leader in the GLP-1 medicine class with Mounjaro, Zepbound, and the company’s deep pipeline of next generation GLP-1 medicines.”
7. Berkshire Hathaway Inc. (NYSE:BRK-B)
Number of Hedge Fund Holders: 117
Berkshire Hathaway Inc. (NYSE:BRK-B) is Warren Buffett’s conglomerate that owns several businesses across multiple sectors. The company’s largest source of revenue is insurance. Berkshire Hathaway Inc. (NYSE:BRK-B) is the most valuable insurance company in the world.
In the fourth quarter of 2023, 117 hedge funds had a stake in Berkshire Hathaway Inc. (NYSE:BRK-B), up from 116 in the third quarter. Micheal Larson’s Bill & Melinda Gates Foundation Trust was the most prominent hedge fund investor with $7.1 billion worth of Berkshire Hathaway Inc. (NYSE:BRK-B) shares.
6. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Apple Inc. (NASDAQ:AAPL) is a multinational tech company that is known for its personal computers, phones, wearables, and more. With 131 hedge fund investors in Q4, it is the 6th best stock to buy for grandchildren.
On January 25, Goldman Sachs lowered the price target on Apple Inc. (NASDAQ:AAPL)’s stock to $223 from $227 and maintained a Conviction Buy rating on the shares.
Apple Inc. (NASDAQ:AAPL) is one of the best stocks to buy for your grandchildren besides Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META).
Wedgewood Partners mentioned Apple Inc. (NASDAQ:AAPL) in its fourth quarter 2023 investor letter. Here is what it said:
“Apple Inc. (NASDAQ:AAPL) was also a top contributor to performance during the fourth quarter. The Company’s services segment revenue growth accelerated to +16% over last year, one of the fastest growth rates since Covid-19 lockdowns, helping drive +11% growth in earnings per share. The strength in the Company’s services segment was aided by over 1 billion paid subscribers across Apple’s media platforms. We estimate that there are more than 2 billion iOS devices in Apple’s global installed base, which still represents a very large addressable share of their current subscriber count. Apple also continues to innovate across its hardware portfolio, with custom silicon for nearly all its device form factors. More recently, the Company launched its new line of Mac computers, which included their M3 family of chips, including the M3 Max, which contains up to an astonishing 92 billion transistors. Apple’s long-term strategy of creating products with customized hardware and software should continue to differentiate their products and help drive solid revenue growth and expense leverage across the Company’s ecosystem.”
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Disclosure. None. 10 Best Stocks To Buy For Grandchildren is originally published on Insider Monkey.
