15 Kid Stocks and Funds to Give as Gifts

What’s on the holiday lists of the kids in your life this year? More Squishmallows, perhaps. Or the 60th anniversary Barbie Dreamhouse. Or possibly the Mario Kart Ride-On Racer. The older kids in your life may be hankering for a gaming headset, Uggs, or the new iPhone.

Perhaps this year, it’s time to not only be generous, but to introduce the kids in your life to the concept of investing. Of building wealth. Of investing a dollar (or more) today and watching it grow over time.

When it comes to giving investments to kids, there are two main schools of thought.

Should You Gift Kids Stocks or Funds?

One school suggests buying kids stocks of companies whose brands they know and love. Advocates of this approach argue that kids will be more interested in investing if they’re investing in something they have a connection with: Kids can then better understand that they own small pieces of actual businesses. And in today’s volatile market, buying kids individual stocks may also teach them the value of long-term investing—and, if they or you can add to the gift over time, the value of dollar-cost averaging in such markets. Lastly, given the struggles in the stock market this year, many of the stocks of companies that kids recognize are undervalued today.

School number two argues that with such a long runway, you’re better off giving the children in your life a well-diversified mutual fund or exchange-traded fund instead, because they have time on their side to accumulate serious wealth. After all, diversification has been called the only free lunch in investing—and young investors may be more likely to stick with investing by avoiding the extreme volatility that can come with buying individual stocks. “The vast majority of young investors would be better off with a total-market index fund,” suggests Morningstar director of personal finance and retirement planning Christine Benz, a proponent of this approach. Besides, a low-cost index fund or ETF includes many of those companies with kid brands.

15 Stocks and ETFs for Kids

Today, we’re sharing investment ideas—both stocks and ETFs—to give to children this holiday season. These securities all earn Morningstar’s top ratings as of this writing and feature brands and services that may appeal to the kids in your life.

1. Alphabet GOOG
2. Bath & Body Works BBWI
3. Comcast CMCSA
4. DoorDash DASH
5. Hanesbrands HBI
6. Hasbro HAS
7. iShares Core S&P 500 ETF IVV
8. Mattel MAT
9. Paramount Global PARA
10. Walt Disney DIS
11. Warner Bros. Discovery WBD
12. Vanguard Total Stock Market ETF VTI
13. Vanguard Total World Stock ETF VT
14. Verizon VZ
15. VF Corp VFC

Here’s a little bit about each stock and ETF. All data is as of Nov. 25, 2022.

Alphabet

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Industry: Internet Content & Information

Alphabet is the parent company of both Google and YouTube—two well-known brands among kids of most ages. The company has significant competitive advantages, which is encapsulated in its wide Morningstar Economic Moat Rating. Alphabet has had a rough year, with revenue growth decelerating, driven by the stronger dollar and economic uncertainty. We expect advertising revenue growth to return to double-digit levels in 2023, says Morningstar senior analyst Ali Mogharabi. Alphabet stock has a Morningstar Rating of 5 stars, which means it’s significantly undervalued relative to our $160 fair value estimate.

Read more: Alphabet’s Q3 Earnings Disappoint as Macroeconomic Uncertainty Hits Ad Revenue

Bath & Body Works

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Specialty Retail

Bath & Body Works is a well-known name among teens who flock to the retailer’s reasonably priced lotions, fragrances, soaps, and candles. We think the company has carved out a narrow economic moat, thanks to its position as the number-one specialty home fragrance, body care and fragrance, and hand soap and hand sanitizer vendor in the United States. “Like numerous other retailers, Bath & Body is not immune to economic headwinds, and we think the firm is set up for further sales declines in the fourth quarter,” suggests Morningstar senior analyst Jaime Katz. But we think the company’s quick response to consumer trends will serve it well over the long term. Bath & Body Works stock is about 51% undervalued by our measures; we peg shares with an $82 fair value estimate.

Comcast

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Industry: Telecom Services

Perhaps best known for its cable television and internet services (and its ubiquitous trucks peppering neighborhoods across the country), kids may also be surprised to find that Comcast’s portfolio also includes the NBC and Peacock networks (which includes WWE content), the Illumination (Minions) and DreamWorks Animation studios (Shrek, Kung Fu Panda, and How to Train Your Dragon), and Universal Theme Parks. “We expect internet Comcast will remain the dominant provider in many parts of the country and compete well in areas where the phone companies are building fiber,” says Morningstar director Mike Hodel. “The high margins on internet access should offset the decline in the traditional television business, where margins have plunged in recent years.” Comcast stock is 41% undervalued relative to our $60 fair value estimate.

DoorDash

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Internet Content & Information

DoorDash became famous with kids (and their parents) for its easy online food ordering platform. Today, the company holds the top position in the U.S. among online food delivery aggregators, and we think it has carved out a narrow economic moat thanks in large part to the network effect among consumers, merchants, and deliverers. “As more consumers use DoorDash, more restaurants are likely to make their offerings available on the app, which will widen the array of foods available, which in turn benefits current consumers on the app while attracting new ones,” explains Morningstar’s Mogharabi. The company is expanding into other verticals, too, including grocery, retail, pet stores, and flowers. DoorDash stock is trading at 5-star levels, and we assign it a $159 fair value estimate.

Hanesbrands

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Apparel Manufacturing

Perhaps best known among kids for its Champion and Hanes brands, Hanesbrands is the market leader in basic innerwear. Like other manufacturers, the company faces headwinds from inflation, a strong U.S. dollar, and lower inventory levels at retailers, but we think the company is in a better position than some of its competitors, says Morningstar analyst David Swartz. The company plans to focus on growing its Champion brand. “We believe Champion has expansion opportunities as it and other activewear apparel have become more than just athletic apparel and are increasingly worn as lifestyle/fashion brands,” says Swartz. Hanesbrands stock is 69% undervalued; we think shares are worth $22 each.

Hasbro

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Leisure

Hasbro is a leader in the toy industry, with popular brands such as Transformers, My Little Pony, Nerf, Monopoly, and Dungeons & Dragons, among others. “The firm operates a relatively differentiated business model, thanks to its digital properties exposure, content creation ability, and key licensing arrangements,” says Morningstar’s Katz. A joint venture with Discovery called Discovery Family brings Hasbro’s brands to television, while the company has also historically dominated the big-screen arena, too, she adds. Hasbro recently announced plans to sell the TV and film business that it acquired from Entertainment One, which we think will allow the company to focus on its core competencies, says Katz. Hasbro stock is trading 46% below our $114 fair value estimate.

iShares Core S&P 500 ETF

• Morningstar Analyst Rating: Gold
• Net Expense Ratio: 0.03%
• Morningstar Category: Large Blend

Managed by BlackRock, the top holdings of this exchange-traded fund read like a who’s who of names that kids would recognize, including Apple AAPL, Microsoft MSFT, and Alphabet. The ETF provides low-cost exposure to U.S. large-company stocks featured in the S&P 500. It’s therefore a diversified portfolio featuring companies that are financially viable, representing about 80% of the total U.S. market capitalization. Morningstar associate analyst Lan Anh Tran calls this ETF “one of the best options for U.S. large-cap exposure.” Other asset managers—including Fidelity, Schwab, State Street and Vanguard—offer similar low-cost ETFs that track the S&P 500 and earn Morningstar Analyst Ratings of Gold, too.

Read more: The Best Index Funds

Mattel

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Leisure

Mattel’s product portfolio reads like a holiday gift list for most kids: Barbie, Hot Wheels, Fisher-Price, Thomas & Friends, and American Girl, among others. Mattel also maintains key licensing relationships, including Disney Princess and Despicable Me. “Its position as one of the largest toy companies allows Mattel to capture these partnerships with relative ease, as the company is a top choice for any partner to pair with, having one of the widest reaches and the deepest marketing pockets across the toy marketer space,” observes Morningstar’s Katz. Given its leadership position, Mattel (like Hasbro) earns a narrow economic moat rating. Mattel stock is trading at 5-star levels; we think shares are worth $27 each.

Paramount Global

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Entertainment

This media conglomerate’s properties include the CBS broadcast network, Nickelodeon, MTV, and Paramount Pictures, as well as streaming services such as Paramount+ and Pluto TV. While highly rated original programming and exclusive sports rights should allow CBS to continue to increase its revenue, top-line growth will be driven by streaming revenue from both Paramount+ and Pluto TV, says Morningstar senior analyst Neil Macker. The company faces an uphill battle for ad revenue that we expect to persist into 2023, says Macker. Still, we think Paramount Global stock is a bargain for patient investors, trading 56% below our fair value estimate of $45.

Read more: Paramount Q3 Earnings Mixed, but Advertising Revenue Decline an Ominous Omen for 2023

Walt Disney

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Wide
• Industry: Entertainment

Often called the Mouse House, today’s Walt Disney is about far more than just Mickey. It encompasses many other well-known kids brands, ranging from its namesake to Pixar (Toy Story, Cars), Marvel (The Avengers, Guardians of the Galaxy), and Lucasfilm (the Star Wars and Indiana Jones franchises). Disney features its characters in theme parks around the world and in films. In a surprise move, the firm’s board reinstalled Bob Iger as CEO of the firm earlier this month. Iger will likely continue to emphasize the central role of streaming at Disney, says Morningstar’s Macker. Despite a rough 2022, we think Disney is successfully transforming its business as the media industry evolves, he notes. Disney stock is significantly undervalued, trading in 5-star range.

Read more: Disney Posts Mixed Earnings With Streaming Subscriber Growth, Records Parks Revenue but Widening Direct-to-Consumer Losses

Warner Bros. Discovery

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Entertainment

One of the largest media firms in the world, Warner Bros. Discovery’s portfolio includes kid brands Superman, Rick and Morty, Harry Potter, DC Films, and Cartoon Network Studios, as well as streaming services HBO Max and Discovery+, which provide access to Looney Tunes and Scooby Doo content as well as South Park and plenty more for kids of all ages. We think the company has significant competitive advantages, thanks to its superior content production and distribution capabilities, as well as a deep and wide content library, says Macker. The company has suffered—and likely will continue to suffer short term—from a falloff in ad revenue, says Macker. But Warner Bros. Discovery stock looks like a steal, trading 62% below our $30 fair value estimate.

Vanguard Total Stock Market ETF

• Morningstar Analyst Rating: Gold
• Net Expense Ratio: 0.03%
• Morningstar Category: Large Blend

The second ETF on the list, Vanguard Total Stock Market ETF, is another low-cost fund indexing the U.S. stock market, but it tracks the CRSP U.S. Total Market Index, which includes all investable U.S. stocks, not just the top 500 by market capitalization. As a result, the fund includes more midsize and small-company stocks than do funds that track the S&P 500 and therefore offers broader market exposure. In any case, the portfolio features the same names that kids would recognize as you’ll find in an S&P 500 index fund, plus others like SeaWorld Entertainment and Papa John’s. Here, too, other asset managers, including Fidelity, BlackRock, and Schwab, manage total market ETFs that also earn Gold ratings from Morningstar.

Vanguard Total World Stock ETF

• Morningstar Analyst Rating: Gold
• Net Expense Ratio: 0.07%
• Morningstar Category: Global Large-Stock Blend

Vanguard Total World Stock ETF packages the entire global stock market in one low-cost product. Morningstar senior analyst Daniel Sotiroff calls the fund’s diversification “unrivaled,” as it tracks the FTSE Global All-Cap Index, which includes stocks of all sizes listed in developed and emerging markets. The portfolio maintains a 60% position in U.S. stocks, with the remaining 40% of assets dedicated to international stocks. Here, too, young investors will find many recognizable names—and will also be introduced early to the idea that good investing ideas are available around the globe, not only in the U.S.

Verizon

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Telecom Services

Verizon is the largest U.S. wireless carrier—and given that kids and their mobile phones are inseparable, no doubt at least one kid in your life sees the Verizon name on their phone daily. Sentiment toward the U.S. wireless industry has turned negative lately, says Morningstar’s Mike Hodel. Why? Because the market is what he calls “extremely mature,” and providers will do whatever it takes to capture any remaining growth—at the expense of their balance sheets. Even so, Hodel suggest that market share shifts only gradually thanks to phone plans and customer inertia; he expects Verizon to deliver consistent results over the long term with modest growth. Verizon stock trades in 5-star range; we think shares are worth $59 apiece.

VF Corp

• Morningstar Rating: 5 stars
• Morningstar Economic Moat Rating: Narrow
• Industry: Apparel Manufacturing

One of the largest apparel firms in the U.S., VF’s brands include Vans, one of the most popular shoe brands among teens. The portfolio features The North Face and Timberland, too. A slowdown in Vans’ sales, a strong U.S. dollar, inflation, and elevated inventories have challenged VF lately, but we think investors are overly concerned about near-term issues, says Morningstar’s David Swartz. The company has a history of successful portfolio management and brand development, and management has a strategic plan in place for the next five years. “We think VF’s compressed valuation presents an opportunity to invest at a discount in a firm that is poised for improved profitability,” he concludes. VF stock is 45% undervalued relative to our $62 fair value estimate.

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