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I've helped my two kids buy stocks once a year since they were 5 and 7, respectively. As my oldest, Alex, became a teenager, he didn't really need my help making stock picks, (but he did need my money). In March 2010, the 13-year-old picked a trio of solid companies to add to his portfolio: Amazon, Activision Blizzard, and Chipotle.
These three have been great investments. Let's look at why my son selected them, find out how they've done, and what he's has done with his shares since.
The $1,000 investment in 2010
Here's how you could have invested $1,000 in Alex's picks in March 2010:
|Company||Stock Price on March 16, 2010||Shares Purchased||Total Cost|
|Activision Blizzard (NASDAQ:ATVI)||$11.64||22||$256.08|
STOCK PRICES AT MARKET CLOSE ON MARCH 16, 2010. TABLE BY THE AUTHOR.
We paid $7.95 to make stock trades at the time, so to be precise, we should add $23.85 to the cost basis. That would bring the total cost to $1,019.43.
Let's cover the biggest winner first.
1. Amazon: E-commerce and more
We are a family of homebodies, so it wasn't a surprise that my son selected the e-commerce specialist. He saw how easy the process of shopping that way was in comparison to having to ask Mom or Dad to drive him somewhere and take the chance that what he wanted wasn't in the store.
Turns out that our teen was on to something. Back then, buying goods online hadn't really gone mainstream yet. In the U.S., e-commerce only accounted for 4% of total retail sales for 2009. But as we all know, the fulfillment specialist had plenty of tricks up its sleeve. Today, it has a $19 billion subscription business that includes Amazon Prime, digital books, movies, and music. Its Amazon Web Services segment topped $35 billion in revenues last year, and third-party sellers contributed a whopping $53 billion to its top line.
Because of its excellent execution on its original business of first-party sales and its ability to expand into other revenue opportunities, the stock has gained amazingly in value. Alex's buy has given him an 18-bagger return.
IMAGE SOURCE: GETTY IMAGES.
2. Activision Blizzard: Producing rockin' video games
Kids love video games and my son was no different. One of the family favorites was Guitar Hero, where players use video controller shaped like a guitar to play the notes on the screen as they whiz by and the sounds of our favorite tunes blared through the TV speaker. Although it's no longer sold, this game was one of the many mega-franchise video game brands from Activision Blizzard.
The company has more ways to bring in money than just selling console games. It generates revenues from subscriptions to its online multiplayer games such as World of Warcraft, in-game purchases, distribution and movie rights, and now e-sports. Since 2009, its annual revenue has grown 51% from $4.3 billion to $6.5 billion last year, while earnings per share have almost tripled from $0.69 to $1.95.
Alex's smart purchase of this gaming giant has delivered him a 509% return.
3. Chipotle: More burritos sold in more places
My teenager was an early investor in Chipotle as he was a big fan of its build-your-own burrito restaurants, and in 2010, he decided to add more shares. The company was expanding its store base, but many cities across the U.S. still didn't have one. At the end of 2009, it had only 956 restaurants, a far cry from its 2,638 locations today.
In the last 10 years, not only has the company grown its store count, it has added menu items, created a take-out catering offering, and expanded its digital ordering capabilities. Even before the coronavirus hit, digital orders accounted for 19.6% of total sales, but in March of this year, online accounted for 37.6% of the total.
Though the company had a difficult couple of years with declining sales in the wake of some health safety issues, its annual revenue has grown from $1.5 billion in 2009 to $5.6 billion last year. This growth propelled the stock to a 689% gain since Alex bought it in 2010.
The result of 10 years of patience
If you had bought when Alex did and held on through Friday, May 8, your $1,019 investment would have grown 11 times in value to $11,525. That's an incredible average annualized gain of 27%, solidly beating the 8% average annualized return of the S&P 500 over the same time period.
|Company||Stock Price on May 8, 2020||Shares Owned||Total Value||Total Gain|
STOCK PRICES AT THE MARKET CLOSE ON MAY 8. TABLE AND CALCULATIONS BY THE AUTHOR.
What's happened to Alex and his shares? Unfortunately, he doesn't own all of these companies anymore. He sold his positions in the video game giant and the burrito maker to pay for a portion of his graduate school education. Even as he's grown older, some things haven't changed; he still needs our money. Luckily for him, his parents agreed to pick up half of the cost of his master's degree. Fortunately for us, we followed his lead a decade ago and invested in Amazon too.
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