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Andrew Allentuck

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Gifts that keep on giving

Andrew Allentuck

 

Stocks and bonds for Christmas? Amid the ballyhoo for conventional Christmas and Chanukah gifts, gifts of securities may seem dull or inappropriate, but think again. For a child, a Canada Savings Bond can be a lesson in the virtues of thrift. For a young adult, a few shares of stock can spark an interest in investing. And for an adult, a small piece of Tiffany & Co. may cost less than one of its trademarked baubles. Moreover, stocks can pay dividends or income in the case of bonds. In time, a small sum can turn into something larger. Few other gifts give so much.

For a child, a Canada Savings Bond can be a first step into finance. Issued in denominations as low as $100, this year’s crop pays 3.00 per cent, a good deal less than a conventional 10-year federal bond that pays 4.1 per cent at time of writing. But CSBs can be literally held by a child as certificates, which are no longer issued for most tradeable bonds, and in the legal sense as well. Other securities cannot be held by children but must, instead, be held for them by persons over 18 or through suitable trust arrangements.

Children love toys and so it should follow that they may take an interest in toy makers. The leading companies include MEGA Brands Inc. (MB-TSX), a Toronto-based company that makes construction blocks. Earnings per share rose by a third in the year ended Sept. 30, 2006. Recently traded at $26.75, it could be a building block of a child’s fortune. Mattel Inc. (MAT-NYSE), recently traded at $23.27 (U.S.), is a giant of the toy biz. Its earnings rose by 45.2 per cent in the 12-months ended Sept. 30, 2006. One might also buy Hasbro Inc. (HAS-NYSE), recently traded at $26.80 (U.S.); the maker of Parker Bros. games and Milton Bradley products.

Harley Davidson Inc.’s symbol HOG on the New York Stock Exchange is as irresistible as the roar of a soft tail. Harley’s earnings rose 15.1 per cent in the 12 months ended Sept. 30, 2006 and the company appears to be able to live indefinitely as the iconic brand of the young and the elderly who want to motor down the highway and feel young again.

Young men often take an interest in beer. If guzzling is attractive, making money on the guzzlers should be even better. Major brewers are locked in stiff global competition. A major name with long links to Canada, Molson Coors Brewing Company (TAP-NYSE), has seen its earnings per share plummet by 64.6 per cent in the 12 months ended March, 2006. The stock is volatile, but it pays a dividend of about 2 per cent on a recent price of US$71.50.

Young women often take a deep interest in cosmetics. Revlon Inc.(REV-NYSE)., which makes numerous hair and skin products, has recently swooned in the stock market to $1.50 (U.S.) per share. The stock is now cheaper than most of the company’s products, meaning that one could give a few shares for less than the cost of a handful of mascara.

For a more upscale stock, consider shares of Tiffany & Co., (TIF-NYSE), the legendary New York-based jeweler recently traded at $35.50 (U.S.). Profits rose 10.8 per cent in the 12-months ended Jan. 31, 2006, but saying that you own a share of the store has a cachet that even a seven-figure tiara can’t match.

There are actually businesses more stratospheric than Tiffany’s. For example, Sotheby’s Holdings Inc., which trades as BID on the New York Stock Exchange, is the world’s oldest surviving auction house, having opened for business in 1744 and sold the crème de la crème of paintings, statues, chateaux and sundry collectibles for the next 262 years. You may feel pinched trying to buy something like Picasso’s portrait, “Dora Maaar with Cat,” which went under Sotheby’s gavel for $95-million (U.S.) in May, 2006, but Sotheby’s own shares, listed as BID on the New York Stock Exchange, have recently been hammered down to $30.60 (U.S.) after hitting a $38.00 high on Oct. 31.

If choosing gifts seems too much of a burden, consider buying the whole store. If that concept is appealing, then consider shares of Nordstrom Inc., the Seattle, Washington-based retailer that peddles swank fashions in leading cities in the U.S. and Europe and sells Burberry and Dolce & Gabbana from its website. Earnings per share rose at an incredible rate of 81.4 per cent in the three years ended Jan. 31, 2006. . Even if you can’t see dropping a few grand on a small suitcase filled with cashmere sweaters, shares of the store that have recently traded at $48.16 (U.S.) and the possibility that holiday sales will drive them even higher should be enduring gifts.

Holidays are about celebration and few stocks are more celebratory than Diageo Plc, the London-based company that markets Johnnie Walker scotch, Tanqueray gin and many other world-famous drinks. The stock is traded in New York under the symbol DEO. Recently priced at $75.80 (U.S.), shares have been on a long upward trajectory, making them as pricey in terms of their recent history as bottles of some of their more famous brands.

Finally, for a stock that doesn’t just depend on children’s wishes for the toy of the season or Wall Street bonuses sustaining sales of luxury goods in New York, consider our own tires-sporting goods-housewares-fishing tackle, etc. merchant, Canadian Tire Corp. (CTC.A-TSX). Earnings per share rose 16.5 per cent for the 12-months ended Sept. 30, 2006 and the company, already a gasoline retailer, is extending its reach further into financial services with a limited range of retail banking services. There is no business that is completely recession proof, but Canadian Tire, with 1,100 stores, gas bars and car washes across the country, is probably as close as one can get. Even if Santa is replaced by the Grinch, Tire, as Bay Street calls it, is likely to do ok. It’s on sale now, down from $130.00 earlier this year, to a recent price of $105.00.

Andrew Allentuck writes about investments for The Globe and Mail, and reviews books on finance for globefund.com and globeinvestor.com. He is also the author of several books.

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