5 Stocks Your Kids Will Love

It's never too early to get your children interested in stock investing. But for most kids, the stock market is dull and just a bunch of numbers flashing across the bottom of the television screen. So how do you pique their interest?

Get them to buy what they know.

Hanging out at the mall hasn't gone out of fashion so if your tween or teenager is going to buy the latest technology gadget or pair of jeans, teach them to profit from it.

I know it's easy to fall back on companies like Disney. Disney is a no-brainer for kids under the age of, say, 10.

But putting Disney to the side, what other options are there that kids would find interesting and, hopefully, are companies that you really would want to invest in so that the money grows?

Kids: The Ultimate Consumers

Stocks that kids are going to be interested in will be consumer-oriented. It will be technology, restaurants and clothing. Their antennas are usually firmly tuned into what the latest trends are.

Nothing separated Brooke Shields from her Calvins in the 1980s, but today's teenagers have a wealth of denim brands to choose from and are willing to pay big prices to get the "best" looks. Same thing with clothing and accessory brands.

And while technology seems to change in a blink of an eye, some tech companies are on the cutting edge of branding their products as "must-have."

These 5 stocks, and the products they make, would be considered "cool" by today's tweens and teenagers and yet also have solid fundamentals.

Tech Still Rules and Apple is King

Ever been to an Apple store on a Saturday afternoon? It's like the old record store hangouts of years past. Kids will spend hours in the store just trying the gadgets and then ask for them as gifts for birthdays and holidays.

While the iPod has dominated the teenage market, the iPhone is not as prevalent, yet, among the tween and teenage consumer. It's not that they don't want it but cost could be keeping them from purchasing it. If Apple's track record is any indication, the iPhone will soon be penetrating the teenage market in force in the coming years.

Apple (AAPL - Analyst Report) is a Zacks #3 Rank (hold) stock. Due to the powerful rally, the stock is now at 52-week highs.

It's also now trading with a pricey forward P/E of 31.73. While Apple has been a growth story the last few years, analysts only expect year over year earnings growth in 2009 of 9.05%. Even with its strong brands, the company is being impacted by a consumer reluctant to spend.

Still, the company has a tremendous track record of surprising to the upside. As you can see from the chart below, it has not missed on estimates since 2004.

In the last few years, it's not been smart to bet against Apple and its growth story.

Clothes and Jeans

The "hotness" of clothing companies comes and goes. But some have staying power like the Gap (GPS - Analyst Report).

Baby boomers and Generation X'ers shopped at the Gap when they were teens and the company continues to reinvent itself to appeal to today's kids, whether it's through Old Navy or it's more upscale brands like Gap and Banana Republic.

The Gap has struggled to find its identity in recent years. But recently it's made a big push into premium denim and its Old Navy stores are finding new customers because of its value pricing.

The Gap is a Zacks #1 Rank (strong buy) stock. The full year Zacks Consensus Estimate is up 9 cents to $1.34 per share in the last 9 months. The company has surprised on estimates the last 4 quarters.

The Gap is also trading near its 52-week high, but is not altogether pricey with a forward P/E of 16.3.

As an added bonus for kids who are going to hold the stock for awhile, it also pays a dividend with a current yield of 1.50%.

Aeropostale and True Religion Apparel

A couple of other "hot" clothing companies to consider would be Aeropostale (ARO - Snapshot Report) and True Religion Apparel (TRLG - Snapshot Report).

If your child is between the ages of 14 and 17, they no doubt know of Aeropostale. The company's clothes and accessories are popular amongst teenagers.

Aeropostale been a growth story, even during the recession. Analysts expect year over year earnings per share growth in fiscal 2010 of 38.17%.

Once again, the stock is trading near 52-week highs but it is attractively valued with a forward P/E of 14.3. It is a Zacks #2 Rank (buy) stock.

True Religion is cashing in on the demand for premium denim as its jeans sell for $100 and higher. While the company carries a small kids' line of clothing (yes, they have children's jeans priced at $150 each), the company's emphasis is on the older customer.

While it may seem a stretch to think that some teenagers would spend $150 to $200 on a pair of jeans, trust me, it's happening.

True Religion is a Zacks #2 Rank (buy) stock. It has surprised on estimates the last 4 quarters by an average of 18.94%. It has a forward P/E of 13.94.

All three stocks have been on a hot streak during the rally. You can see their charts below:

30 Years of Happy Meals

Finally, your kids are still eating out. Kids practically grow up on McDonald's whether it's from the Happy Meals, the breakfasts, or now, the premium coffee and other drinks. Happy Meals just celebrated their 30th anniversary (if that doesn't make you feel old, what will?).

McDonald's (MCD - Analyst Report) is a solid addition to a child's portfolio because it pays a hefty dividend, with a current yield of 3.60%.

The company is a Zacks #3 Rank (hold) stock but has been consistent on surprising on estimates for the last 4 quarters.

Its stock has been out of favor with investors during the rally, despite increasing worldwide same store sales during the worst months of the recession. As a result, it's not very expensive, trading at 14.3x forward earnings.

You can see the earnings surprise history below:

Make It Fun

Investing should be fun, whether it's for kids or adults. Buying companies your kids know and understand will make the whole concept of investing easier for them to relate to. At the same time, they will hopefully invest in solid companies that will grow their money over time and, while they're at it, learn the power of compounding.

Investing in fun stocks early in life just might make stock investing a lifetime habit.

Ways to Find Stocks for Your Kids

Zacks Custom Screener - This is the place to start to create your own screens where you can search by sector, valuation, dividend yields and a host of other criteria.

Research Wizard - This sophisticated tool will allow you to search for a detailed list of companies using even more specific criteria, including Zacks Rank and earnings history.

Read the full analyst report on MCD

Read the full analyst report on GPS

Read the full analyst report on TRLG

Read the full analyst report on AAPL

Read the full analyst report on ARO