(Stock)ing Stuffers For Your Children's Future
Margie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
It’s the time of year when we are all thinking of gifts and giving, especially for our children. We constantly worry about their future, and one of the best ways to ensure their financial security is through long-term investing.
Warren Buffett thinks long-term, and only sells if the fundamentals of the company have changed. He cares little for the near-term movement of the markets and prices, unless a stock goes into cheap territory, in which case he’ll buy more. With the long term in mind, here are five companies whose stock certificates would make an excellent stocking stuffer for your kids.
1. Google (NASDAQ: GOOG) -- The king of search also leads in mobile operating system market share. The company is seemingly firing on all cylinders. Google Glass has the potential to be a huge hit, and their dedication to research and development will yield new products for years to come. Employees LOVE working there, and the company has grown at huge rates, especially given its size.
Biggest risk: Will be unable to monetize mobile environment as they did desktop. Security is a primary issue, as hackers and thieves are always trying to steal your information. For good reason, people don’t want to purchase via mobile devices currently. IF security gets solved, Google will make even more from mobile than desktop with GPS location and increased number of overall searches. However, the IF is capitalized.
2. Facebook (NASDAQ: FB) -- the only question is can Facebook make an average of $50 off its 1 billion + user base. If so, it will be able to justify its current market cap. The company conducts experiments on a continual basis, but only rolls out a new application to users after lots of A/B testing.
Facebook has enormous potential. As I have mentioned in the past, I believe should Mark Zuckerberg decide to, Facebook could easily rake $50 a user from gambling. They already have bingo and slots on the UK version of the site, and as I anticipate the United States to legalize poker, Facebook has the opportunity to become the largest online multi-table tournament poker provider the world has ever seen (as of now I am the lone voice out there foreseeing this future.) There is enormous money to be made here, and even should they choose not to go down that road -- which given their actions in the UK does not seem to be the likeliest scenario -- I still believe that they will find a way to slowly milk profits from the user base.
Biggest risk: Facebook gets arrogant/ throws in too much advertising, and in short order loses its biggest competitive advantage, which is ubiquity of use, and users switch to Google Plus, or some other, still unknown platform. At this point however, Facebook's conservative actions indicate they understand this risk perfectly.
3. iRobot: (NASDAQ: IRBT) -- the consumer robotics market is set to take off. iRobot was the original innovator in this field, having come out with the original Roomba 10 years ago. This is a relatively small market cap company, around $500 million. I am of the firm belief that 10 years from now robots will be ubiquitous in our lives. To me, robot penetration is akin to Internet connections in 1995 -- you know people who have them, but you’re not sure you need it, at least not yet. Although the stock is much more risky, given its smaller market cap than the others I mention, you are investing at the beginning of a trend, into a stock that is fairly cheaply priced.
Biggest risk: products become overmatched by a bigger badder competitor, with better marketing. iRobot has not done nearly as good a job as it could have making people aware of its products.
4. Berkshire Hathaway (NYSE: BRK-B) -- want to invest like Buffett? Might as well give him your money to invest for you. Not to mention the fact that in addition to his superlative valuations skills, Mr. Buffett gets deals that the ordinary investor, nay, perhaps no one else in the world does, and he passes these benefits onto his shareholders. For example, during the financial crisis, Goldman Sachs gave him a sweetheart of the deal in part just to have his name and weight attached to their company. When other investment banks like Lehman Brothers were going down, Goldman borrowed $5 billion from Berkshire, and paid a hefty price to have Warren's name associated with their plight and ultimate outcome. Might as well be able to take advantage of that.
Biggest risk: Mr. Buffett is 82 years old. Will Berkshire be able to draft a leader as talented as their own Michael Jordan? One thing is for sure -- whoever succeeds him won't have the same name cachet with the public, and Goldman likely wouldn't be paying the same enormous fee to have his or her name associated with their company.
Add on -- I want to add one thing, all these companies have one common thread. The founders who created each of these companies are still at the helm. For many founders, their company is their child, and they want to ensure its long-term survival, unlike many of the other short-term managers who slash spending on R&D, lowering costs short term, raising near-term profits, so that they can cash out their stock options at inflated high prices, and years later the company is floundering because they have no new products coming through the pipeline.
Hopefully your children thank me in the future for suggesting these stocking stuffers. Wishing you a happy holiday season.
margiecfl has positions in Facebook, Google, iRobot, and Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway, Facebook, and Google and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Berkshire Hathaway, Facebook, Google, and iRobot . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!