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Christmas gift idea for the kids

Richard Loth

The Philadelphia Inquirer’s financial columnist, Jeff Brown, says that when considering Christmas gift ideas at his home with his 10-year-old, “the days of stuffed animals and Lego construction toys are over.” My take on this is that considering the rampant and pervasive nature of conspicuous consumption in the U.S., it’s not all that much of a surprise that it has reached down to the pre-teen level. According to Brown, the gift of choice is “money.” And why not. When it comes to gift giving to the little ones, it’s impossible for parents and grandparents to keep up with the pace of change and variety of offerings. Brown asks “How can they know which computer games [and the myriad of electronic gadgets] are cool and which aren’t?”As a grandparent, I know I don’t want to be uncool. Nevertheless, I’m not quite ready yet to stuff my grandchildren’s’ stockings with cash. I can, however, recommend a Christmas present that keeps giving – an investment-oriented gift. This approach simplifies the gift-giving process and points the child in the direction of saving and investing for his or her future. Giving stock to youngsters is not a terribly original idea. Generally, a share or two from well-known companies like Disney (DIS), McDonald’s (MCD) or Nike (NKE) will resonate with youngsters, i.e., they can relate to the company’s products and services. This conventional approach is OK, but let’s take a look at what a recent Standard & Poor’s (S&P) research report suggests.S&P sees a very bright spot in the otherwise so-so consumer-discretionary stock sector. It is very bullish on the pet-product sector, and with reason. The American Pet Products Manufacturers Association (APPMA) reports that “pet product sales topped $34.4 billion last year, more than doubling the level seen in 1994.”A recent APPMA survey states that “more than 69 million U.S. households, or 63 percent, own a pet,” and of course, it’s not surprising that “45 percent of those households own two or more.” S&P equity analyst, Michael Souers, expects “the industry to keep growing like an overfed cat.” He projects “a compound annual growth rate of 6 percent through the end of the decade.”As dog-owners, my wife and I can fully appreciate the money being spent on pets. Our beloved, aging basset hound gets acupuncture monthly, has three beds scattered throughout the house, enjoys special treats, and is fed a number of fairly expensive natural supplements and medicines. I don’t doubt for a second that the pet-products industry falls into the growth category.S&P’s stock recommendations in this sector represent a convenient blend of positive investment and kid-friendly qualities together in one package.Two of the three S&P picks are prominent companies. If you are pet owner, or pet owner to be, PetSmart (PETM) and Petco (PETC) are familiar places, and ones that children can easily relate to. The third selection, VCA Antech (WOOF) is less-known but is the major player in diagnostic veterinary laboratories and hospitals in the U.S. S&P gives PetSmart its top 5-star rating (strong buy). Petco and VCA Antech are also both highly regarded as a “buy” with solid 4-star ratings. As a dog-lover, I admit to being attracted to VCA by nothing other than its clever ticker symbol. The emotional thrill of giving and receiving a cuddly puppy or kitten far exceeds that of using stock as a Christmas gift. However, as Ebenezer Scrooge would surely point out, if given the opportunity, pet-owners need to provide for food, amenities, medicines and visits to the vet – i.e., expenses. To the contrary, stock-owners can sit back, relax and enjoy capital appreciation and dividends. I know, “bah, humbug,” but it’s an idea worth considering.The Investing Wisely column is written by Richard Loth, managing principal of Mentor Investing and an independent registered investment adviser. Loth can be reached at 328-5591 or mentor@centurytel.net.Vail, Colorado


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