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As you read this article, I may be rushing my wife to the hospital for the birth of our first child.
We (i.e. she) is due on April 5, just two days from now. I’m expecting to get “the call” at any minute. I’m filled with so much anticipation/excitement/anxiety that I’m about ready to burst.
The only thing that has kept me – and, more importantly, my wife – sane over the past few weeks is getting the house ready for the baby. My last five or six weekends have been spent putting together the crib, putting together the changing table, decorating the nursery, installing the car seat – basically anything to keep my mind occupied.
Oh, and shopping … lots and lots of shopping. It’s amazing how much it costs to bring a tiny little seven- or eight-pound person into your home. I’m sure it will be worth every penny. But it sure ain’t cheap.
And that got me thinking…
Given the astronomical costs of Baby, Inc. – second only to the even more outrageous costs of Wedding, Inc. – the companies that sell us expecting mothers and fathers all this stuff must be making a killing. And with the population expanding and consumers willing to spend now that the threat of a double-dip recession is safely behind us, those companies must be raking it in like never before.
Some of them may even make for good investments.
So, with baby on the mind, I went looking for “baby stocks” – the public companies that sell us all those car seats, cribs and changing tables. I found five baby stocks that look potentially appealing.
Baby Stock #1: Natus Medical (Nasdaq: BABY)
The maker of birth center equipment with the easy-to-remember ticker symbol has been on a tear of late.
BABY shares have risen 98.5% in the last year and 124% in the last two years. The reason is simple: Natus Medical’s earnings per share have risen from -$0.39 in 2011 to a record +$0.74 last year. One reason for the financial windfall is that more and more hospitals are buying Natus Medical’s equipment to enhance their treatment facilities.
And it doesn’t look like the company’s sales will be slowing down anytime soon. Analysts are expecting Natus Medical’s EPS to increase by another 61% this year.
Baby Stock #2: The Children’s Place (Nasdaq: PLCE)
A specialty retail company that sells apparel for children ages newborn to 10 years old, The Children’s Place hasn’t performed as well as Natus Medical of late. Sales and EPS have dipped in the last year, limiting the stock to a very modest 10% gain.
However, the company did initiate a dividend last month, and the stock trades at less than 15 times forward earnings. With earnings per share expected to improve dramatically this year, The Children’s Place looks like a decent value buy.
Baby Stocks #3 and #4: Johnson & Johnson (NYSE: JNJ) and Procter & Gamble (NYSE: PG)
Even if the whole baby angle doesn’t appeal to you, there’s a lot to like about these two stocks – especially if you’re an income investor.
Johnson & Johnson and Procter & Gamble are both “Dividend Aristocrats,” having increased their dividends for more than 25 years running. P&G offers a generous 3% yield. JNJ’s 2.7% yield isn’t too shabby either.
It just so happens that both these consumer-products giants are also leading sellers of certain baby-related items. Johnson & Johnson is known for its baby shampoo that’s designed not to sting your little one’s eyes. The company also sells baby powder and baby lotion.
Procter & Gamble isn’t quite as identifiable with baby products. But its many brands include Pampers and LUVS diapers – products with which I’m sure to be quite familiar in the coming months.
Baby Stock #5: Amazon (Nasdaq: AMZN)
Amazon.com has never been mistaken for a “baby company.” It’s known more for books, video games, electronics and drones.
But almost every parent I know swears by Amazon Prime – a subscription-based branch of Amazon that allows customers to buy a multitude of items at a discount, including diapers. Amazon Prime has quickly become known as the cheapest place to find diapers, allowing users to get up to 30% off on all Huggies, LUVS, and Pampers orders.
Amazon paid a handsome fee for the rights to all those products. It acquired Diapers.com in 2010 for a cool $540 million. So far, the deal was more than worth the money. Amazon’s revenue has more than doubled since it cornered the market on discount diapers. Meanwhile, its stock has also doubled since the deal.
Bottom Line
Whether you’re a new mother or father or not, any one of these baby stocks could be a nice addition to your portfolio.
Perhaps I’ll buy one or two of them myself in between diaper changes.
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