10 Best Stocks To Buy For Grandchildren

In this article, we discuss the 10 best stocks to buy for grandchildren.

The world held its breath for almost three years as the global financial markets and economy suffered from one shock after another. The bears were sure that the US economy would be hit by a recession in 2023 or 2024, but the market proved all their predictions wrong and made an impressive comeback on the back of artificial intelligence (AI).

While the bulls are quite optimistic about the future, there are still concerns regarding a soft landing or a mild recession. A JPMorgan report points out that there are indications of slowing growth in the current year but not a total collapse and still holds the belief that a mild recession could take place in the next year. The report states:

“The challenge for investors: the damage to public sector finances from mega-deficits, markets that already price in a very soft landing and the concentrated contribution of megacap stocks. In 2023, S&P 500 earnings were flat; they were up 33% for the 7 megacap stocks and down 5% across the rest of the S&P 500. All things considered, 2024 looks like a year of slowing GDP growth, single-digit earnings growth and single-digit returns on the median S&P 500 stock.”

On a global scale, the International Monetary Fund’s (IMF) January 2024 World Economic Outlook (WEO) report also contains revisions regarding the IMF’s October 2023 predictions and states that the global growth is expected to be 3.1% in 2024, up 0.2% from the IMF’s October predictions. The IMF predicts a 3.2% growth in 2025. Furthermore, it is believed that global headline inflation is expected to fall by 5.8% in the current year and 4.4% in 2025.

In this economic environment and volatility, millions of American families would wonder how they could help their children and grandchildren secure their financial future. One of the best ways to do that would be to teach them money management. According to the Wall Street legend, Warren Buffett, sometimes parents start teaching financial literacy to their children later than they should. He said:

“Whether it’s teaching kids the value of a dollar, the difference between needs and wants or the value of saving — these are all concepts that kids encounter at a very early age, so it’s best to help them to understand it.”

Buying stocks for your children or grandchildren is also a good way to secure their financial future. Value stocks are some of the best options when looking at long-term investments. They are stocks of companies that are considered to be undervalued compared to their intrinsic value or potential for growth. Value stocks have also been endorsed by Wharton School Professor of Finance Jeremy Siegel for the current year. In a CNBC interview, he mentioned the abnormal gap between the price-to-earnings (PE) ratio of the Russell 1000 Growth and Russell 1000 Value. Based on that, he predicts a 15% gain in value stocks in 2024. Additionally, the best stocks to buy for grandchildren could include stocks with healthy long-term dividends.

A close-up of the NASDAQ ticker board displaying the stock increase of a Dallas-based company.

Our Methodology

For this article, we took a look at our article, 12 Best Long-Term Investments for a Child, and checked the portfolio composition of all the ETFs and index funds mentioned in it. Next, we chose the 10 most commonly found stocks in these fund’s top 10 holdings.

The stocks are listed in ascending order of their hedge fund sentiment as of the fourth quarter of 2023. The hedge fund data was taken from Insider Monkey’s database of 933 elite hedge funds. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

Best Stocks To Buy For Grandchildren

10. Tesla, Inc. (NASDAQ:TSLA)

Number of Hedge Fund Holders: 82

Tesla, Inc. (NASDAQ:TSLA) is an American automotive and clean energy company. It is the pioneer of electric vehicles in the United States. Tesla, Inc. (NASDAQ:TSLA) is headquartered in Texas.

On February 15, Cathie Wood’s ARK Invest bought around 14,500 shares of Tesla, Inc. (NASDAQ:TSLA). In a CNBC interview, Wood predicted a reacceleration in growth and a huge increase in margins for the company within the next couple of years due to autonomous taxi networks.

In the fourth quarter of 2023, Philippe Laffont’s Coatue Management was the largest shareholder of Tesla, Inc. (NASDAQ:TSLA), with over 4 million shares worth $1 billion.

Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META) are some of the best stocks to buy for grandchildren, along with Tesla, Inc. (NASDAQ:TSLA).

9. Broadcom Inc. (NASDAQ:AVGO)

Number of Hedge Fund Holders: 91

Broadcom Inc. (NASDAQ:AVGO) is an American semiconductor and infrastructure software products company. A major chunk of the company’s revenue comes from its semiconductor-based products. Broadcom Inc. (NASDAQ:AVGO) is headquartered in California.

On January 19, Goldman Sachs reinstated its Buy rating on Broadcom Inc. (NASDAQ:AVGO) and mentioned that it expects a double-digit revenue growth for its AI-related business. The firm has a price target of $1325 for the company.

Broadcom Inc. (NASDAQ:AVGO)’s stock was owned by 91 hedge funds in the fourth quarter of 2023.

ClearBridge Multi Cap Growth Strategy made the following comment about Broadcom Inc. (NASDAQ:AVGO) in its Q2 2023 investor letter:

“While the ClearBridge Multi Cap Growth Strategy has limited mega cap exposure, which has been a recent headwind to relative performance, we own several companies that stand to benefit from the explosive growth in generative AI. These holdings play key roles in building out the necessary infrastructure and helping customers leverage capabilities enabled by this emerging technology.

Semiconductor and software solutions provider Broadcom Inc. (NASDAQ:AVGO), for example, is an important supplier of networking chips that power ethernet switches and routers for connectivity between AI servers. The company sees quarterly revenue from this part of their business exceeding $1 billion in their fiscal third quarter, on a trajectory toward doubling over the course of the year.”

8. Eli Lilly and Company (NYSE:LLY)

Number of Hedge Fund Holders: 102

Eli Lilly and Company (NYSE:LLY) is one of the oldest and largest pharmaceutical companies in the world. The company is headquartered in Indiana, U.S., and sells its products in around 125 countries.

On February 16, Morgan Stanley analyst Terence Flynn increased its price target on Eli Lilly and Company (NYSE:LLY)’s stock to $950 from $805 and kept an Overweight rating on the shares. As of the February 28 market close, the company’s stock is up over 27.94% year-to-date.

Eli Lilly and Company (NYSE:LLY) ranks 8th on our list of best stocks to buy from grandchildren.

Baron Health Care Fund stated the following regarding Eli Lilly and Company (NYSE:LLY) in its fourth quarter 2023 investor letter:

“Stock selection was also positive in the sub-industry owing to strong gains from therapeutics-focused pharmaceutical giant Eli Lilly and Company (NYSE:LLY). Lilly’s stock continued to outperform driven by strong sales of blockbuster diabetes medicine Mounjaro and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises, particularly after Novo Nordisk released its SELECT trial results showing a 20% relative risk reduction in overweight patients with cardiovascular disease and no prior history of diabetes.

Eli Lilly and Company is a global pharmaceutical company that discovers, develops, manufactures, and sells medicines in the categories of diabetes, oncology, neuroscience, and immunology, among other areas. Stock performance was strong due to strong third quarter sales of blockbuster diabetes medicine Mounjaro and ongoing enthusiasm surrounding the company’s obesity and diabetes franchises. We continue to think Lilly is well positioned to grow revenue and earnings at attractive rates through the end of the decade and beyond.

We own Eli Lilly and Company, which we believe will remain a leader in the GLP-1 medicine class with Mounjaro, Zepbound, and the company’s deep pipeline of next generation GLP-1 medicines.”

7. Berkshire Hathaway Inc. (NYSE:BRK-B)

Number of Hedge Fund Holders: 117

Berkshire Hathaway Inc. (NYSE:BRK-B) is Warren Buffett’s conglomerate that owns several businesses across multiple sectors. The company’s largest source of revenue is insurance. Berkshire Hathaway Inc. (NYSE:BRK-B) is the most valuable insurance company in the world.

In the fourth quarter of 2023, 117 hedge funds had a stake in Berkshire Hathaway Inc. (NYSE:BRK-B), up from 116 in the third quarter. Micheal Larson’s Bill & Melinda Gates Foundation Trust was the most prominent hedge fund investor with $7.1 billion worth of Berkshire Hathaway Inc. (NYSE:BRK-B) shares.

6. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 131

Apple Inc. (NASDAQ:AAPL) is a multinational tech company that is known for its personal computers, phones, wearables, and more. With 131 hedge fund investors in Q4, it is the 6th best stock to buy for grandchildren.

On January 25, Goldman Sachs lowered the price target on Apple Inc. (NASDAQ:AAPL)’s stock to $223 from $227 and maintained a Conviction Buy rating on the shares.

Apple Inc. (NASDAQ:AAPL) is one of the best stocks to buy for your grandchildren besides Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), and Meta Platforms, Inc. (NASDAQ:META).

Wedgewood Partners mentioned Apple Inc. (NASDAQ:AAPL) in its fourth quarter 2023 investor letter. Here is what it said:

“Apple Inc. (NASDAQ:AAPL) was also a top contributor to performance during the fourth quarter. The Company’s services segment revenue growth accelerated to +16% over last year, one of the fastest growth rates since Covid-19 lockdowns, helping drive +11% growth in earnings per share. The strength in the Company’s services segment was aided by over 1 billion paid subscribers across Apple’s media platforms. We estimate that there are more than 2 billion iOS devices in Apple’s global installed base, which still represents a very large addressable share of their current subscriber count. Apple also continues to innovate across its hardware portfolio, with custom silicon for nearly all its device form factors. More recently, the Company launched its new line of Mac computers, which included their M3 family of chips, including the M3 Max, which contains up to an astonishing 92 billion transistors. Apple’s long-term strategy of creating products with customized hardware and software should continue to differentiate their products and help drive solid revenue growth and expense leverage across the Company’s ecosystem.”

5. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 173

With 173 hedge fund investors in the fourth quarter of 2023, NVIDIA Corporation (NASDAQ:NVDA) ranks 5th on our list of best stocks for grandchildren. It is a California-based company known for designing and manufacturing computer graphics processors, chipsets, and more.

On January 19, Meta Platforms, Inc. (NASDAQ:META)’s Mark Zuckerberg commented that the tech giant is planning on spending billions on NVIDIA Corporation (NASDAQ:NVDA)’s chips, including 350K H100 chips.

On January 23, Cantor Fitzgerald initiated coverage of NVIDIA Corporation (NASDAQ:NVDA)’s stock with an Overweight rating and a $775 price target.

NVIDIA Corporation (NASDAQ:NVDA) was mentioned in Polen Capital’s fourth quarter 2023 investor letter. Here is what it said:

“Apple and NVIDIA Corporation (NASDAQ:NVDA) alone drove over 1,100 basis points of the Russell 1000 Growth Index’s 42% return, so not owning them was a meaningful headwind to our relative return in 2023. NVIDIA shares rocketed higher by well over 200% in 2023 although they slightly underperformed our Portfolio and the Russell 1000 Growth in the fourth quarter. Generative AI has been a huge boon for NVIDIA as the use of LLMs like ChatGPT and others requires tremendous processing power that, today, is mostly provided by NVIDIA’s GPUs. All large cloud service providers, AI factories, and many large consumer internet companies are laying the foundation for generative AI by deploying NVIDIA GPUs and other parallel processing chips to be able to do large scale generative AI either for internal use (i.e., Meta) or as a service for others (i.e., AI factories) or both (cloud service providers such as Amazon, Microsoft, and Google).

Given many of NVIDIA’s customers or its end customers are still very much in the experimentation phase with generative AI, it is unclear how sustainable the current demand for GPUs truly is. At the same time, it is known that NVIDIA has historically been highly cyclical. By the end of 2024, we believe NVIDIA will already account for roughly half the market for datacenter chips, servers, and networking equipment, which is unprecedented. Even though the valuation at 25x forward earnings doesn’t look very demanding at first glance, it assumes NVIDIA will own virtually the entire datacenter chip market in just the next few years and will sustain year-on-year growth despite being a cyclical business that is currently experiencing much higher new peaks.

We believe NVIDIA is a highly advantaged business, but we also believe the long-term growth outcomes are currently too variable, and the expectations built into the company’s $1.2 trillion valuation as of this writing assume the most optimistic of those scenarios.”

4. Alphabet Inc. (NASDAQ:GOOGL)

Number of Hedge Fund Holders: 214

Alphabet Inc. (NASDAQ:GOOGL) is a California-based tech holding conglomerate that operates through various subsidiaries, including Google, Waymo, Verily, and more.

37 Wall Street analysts covered Alphabet Inc. (NASDAQ:GOOGL) in the last three months, and 29 maintained a Buy rating on the stock. The average analyst price target of the company stood at $164.59, representing an upside of 20.68% as of the February 28 market close.

In the fourth quarter, hedge fund sentiment was positive toward Alphabet Inc. (NASDAQ:GOOGL), as 214 hedge funds held a stake in the stock at a combined value of $28.8 billion.

Tsai Capital Corporation mentioned Alphabet Inc. (NASDAQ:GOOGL) in its fourth quarter 2023 investor letter. Here is what it said:

“Alphabet Inc. (NASDAQ:GOOG) ($140.93 – up 58.8% for the year. Recent high $143.95) Alphabet, led by Sundar Pichai, has a near monopolistic position in online search, with more than 90% of the global market and greater than 80% of the U.S. market. The company also owns YouTube, which it purchased in 2006, and is now the second most popular website globally, followed by Google Search. While there are valid concerns about disruption from Artificial Intelligence (AI) and large language models (LLM), and competition for YouTube, we believe the economic moats for both businesses remain intact. We also think the Google ecosystem, which benefits from strong network effects, will drive advertising revenue at a high single-digit rate for at least the next five years. Alphabet also owns one of the three major cloud companies (Google Cloud Platform) and has a number of private businesses that, while not profitable today, have the potential to become more valuable to shareholders over time. The company’s balance sheet is strong, with approximately $106 billion of net cash ($8.48/share), and free cash flow conversion remains excellent.”

3. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 242

Meta Platforms, Inc. (NASDAQ:META) is a California-based company that provides products and services for social networking, business insight solutions, and more.

On January 25, BofA raised the price target on Meta Platforms, Inc. (NASDAQ:META)’s stock to $425 from $405 and maintained a Buy rating. The analyst stated that the reasons behind the firm being constructive on the stock include reels contributing positively, growing revenue because of messaging, and more.

On January 25, Meta Platforms, Inc. (NASDAQ:META) reported that it will build an $800 million data center campus in Indiana and expects to start operations in 2026. The data center will be the 18th one in the company’s network of data centers in the US and is expected to connect its clients to the firm’s technologies.

Moon Capital Management commented on Meta Platforms, Inc. (NASDAQ:META) in its fourth-quarter 2023 investor letter. Here is what it said:

“Meta Platforms, Inc. (NASDAQ:META), holding company for Facebook, Instagram and other addictive social media properties) was another security that many deemed unownable in early 2023. Facebook earns massive amounts of advertising revenue, too much of which we believed the company was wasting on very expensive, non-core projects. Apparently, someone at Meta HQ finally agreed, as the company began exhibiting serious expense discipline, resulting in improved earnings – as well as a 194% return on the stock for the year.”

2. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 293

Amazon.com, Inc. (NASDAQ:AMZN) is a massive tech company that offers services and products related to e-commerce, cloud computing, digital streaming, and AI.

On January 25, Amazon.com, Inc. (NASDAQ:AMZN) announced that Amazon Web Services will invest $10 billion to construct two data center complexes in Mississippi. The company is looking to expand its operations in the state and boost the economy by creating new jobs.

According to Insider Monkey’s database, 293 hedge funds had investments in Amazon.com, Inc. (NASDAQ:AMZN)’s stock in Q4, up from 286 in the previous quarter. 

Amazon.com, Inc. (NASDAQ:AMZN) was mentioned in Polen Capital’s fourth quarter 2023 investor letter. Here is what it said:

“For the full year, the top relative and absolute contributors were Amazon.com, Inc. (NASDAQ:AMZN), Salesforce, and ServiceNow. Amazon shares appreciated 88% in 2023, driven primarily by rapidly expanding operating profit margins and free cash flow growth. After the pandemic, Amazon experienced a period of inefficiency and overinvestment in its distribution and logistics infrastructure. Amazon is now leveraging these investments as growth returned to its e-commerce business in 2023 after a highly unusual 2022. At the same time, Amazon’s rapidly growing and high-margin advertising business is contributing strongly to the entire company’s operating profit growth. The AWS (Amazon Web Services) cloud infrastructure and services business continued to slow in 2023 as customers anticipating a more difficult economic environment looked to save money on their cloud spend, but these cloud spending optimizations began to stabilize in the second half of 2023. We now expect customer interest in generative AI will begin to contribute to growth.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 302

Microsoft Corporation (NASDAQ:MSFT) is one of the world’s biggest tech companies; its well-known products include its signature operating systems, video games, and more.

On January 25, Microsoft Corporation (NASDAQ:MSFT) announced a five-year partnership with Eviden, an extension to the existing collaboration between the two companies, to further develop and distribute Data & AI, Copilot, and cloud transformation solutions.

Vulcan Value Partners mentioned Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2023 investor letter. Here is what it said:

“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software company with a broad range of offerings including Microsoft Office, gaming, Azure cloud computing, LinkedIn, and more. The company experienced a good quarter with solid growth and strong margins. The company is benefiting from its investments in artificial intelligence. Microsoft is deeply entrenched within its customer base, has high switching costs, and is benefiting from growth tailwinds such as cloud computing and artificial intelligence. We think an underappreciated strength of Microsoft’s business model is that not only are its products designed to work together, but it is also more economical for the customer when multiple products are bundled together. This bundling approach positions Microsoft well to gain market share over time.”

You can also look at the 13 Worst Rated Fast Food Restaurants in America According to Reddit and the 10 Best Gold Royalty and Small-Cap Gold Stocks to Buy.

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and investors. Please subscribe to our daily free newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.

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Disclosure. None. 10 Best Stocks To Buy For Grandchildren is originally published on Insider Monkey.