Investing In Teen Trends

By Kapitall | April 16, 2012 AAA


Written by Rebecca Lipman, former teenager

Are you a younger investor looking for ways to trade? Not sure where to start?

Don't worry; you're better at this than you might think. For example:

Did you think iPods were the bee's knees when you first got one? It's old news now, but chances are you knew the product line was cool from the start. And look at Apple's (Nasdaq:AAPL) stock, in 10 years it has grown from $8 per share to over $600.

What about "The Hunger Games?" Did you read the book, or know someone who did and planned to drag you off to the movie theater? You were probably aware it was a big deal. Analysts didn't until later in the game. Many had never even heard of it. Perhaps you could have bought stocks of Scholastic (Nasdaq:SCHL) before it shot up 17% from higher-than-expected book sales, or the film's producer Lions Gate (NYSE:LGF) before its shares soared on record ticket sales. "Harry Potter" also had similar effects on the stock market.

Did you realize bright colored pants are all the rage, and figure out that Gap Inc. (NYSE:GPS) is a great best place to get them? Analysts are now clued in too - just look at how the company (which also owns Banana Republic and Old Navy) rallied in recent months.

You see, analysts thought the company was in trouble because their target market, college students and older, were largely in financial distress. But they forgot about teens - teens still have money. Ta-da, surprise rebound. That also helps explain the jump in Hot Topic's (Nasdaq:HOTT) share price.

Now that social media is taking over the scene with Pandora (NYSE:P), Groupon (Nasdaq:GRPN) and the highly anticipated Facebook IPO, teenagers and 20-somethings may have a serious advantage.

They are after all one of the biggest and forward-moving markets. They typically know what's popular before the geezers on Wall Street figure out the product exists, and it's clear no amount of research can replicate what teenagers already know.

So Here's the Big Question. What Do You Know?
A good place to start is to just think about your habits: Do all of your friends eat at the Cheesecake Factory (Nasdaq:CAKE) more than others might think? Have you foregone eating at McDonald's (NYSE:MCD) and think Burger King is the place to be? Good news, BK is relaunching itself as a stock (BKW) in the coming months.

It's no guarantee the rest of the market is replicating your movements, but you never know. So do your research - find a company you believe in. But don't forget to look deeper into their fundamentals to get a sense of where the company is headed.

Kapitall's Investing 101 articles can help you with that, as can our free tools that let you compare company data using colorful interactive graphs. You can also open a free practice account to test your skills in the market before you make the leap.

Yes, It's a Stock
One of the most amazing things about searching your interests in the market is discovering that, yes, you can actually buy into that.

From giant companies like General Motors (NYSE:GM) and video game manufacturers like Electronic Arts (Nasdaq:EA) and Zynga (Nasdaq:ZNGA) to the small bakery/cupcake chain Crumbs (Nasdaq:CRMB), there's usually a way to get involved.

Interactive Chart: Press Play to compare changes in annual return over the last few years for nine of the stocks mentioned below.



Business Section: Investing Ideas:
To give you a starting point, here's a list of apparel companies with heavy exposure to teen spending. What do you think of them? (Click here to access free, interactive tools to analyze these ideas.)

1. American Eagle Outfitters, Inc. (NYSE:AEO): Operates as an apparel and accessories retailer in the United States and Canada, and has a market cap of $3.20B. It's been a rough couple of days for the stock, losing 6.69% over the last week.

2. Abercrombie & Fitch Co. (NYSE:ANF): Operates as a specialty retailer of casual apparel for men, women and kids, and has a market cap of $4.02B. It's been a rough couple of days for the stock, losing 7.25% over the last week.

3. Aeropostale, Inc. (NYSE:ARO): Designs, markets and sells casual sportswear and other fashion merchandise under its own brands, principally targeted at customers 11 to 18 years old, and has a market cap of $1.67B. It's been a rough couple of days for the stock, losing 7.74% over the last week.

4. Bebe Stores, Inc. (Nasdaq:BEBE): Engages in the design, development and production of women's apparel and accessories, and has a market cap of $743.75M. After a solid performance over the last year, BEBE has pulled back during recent sessions. The stock is -4.26% below its SMA20 and -2.62% below its SMA50, but remains 14.62% above its SMA200. The stock has gained 41.28% over the last year.

5. DSW Inc. (NYSE:DSW): Operates as a specialty branded footwear retailer in the U.S., and has a market cap of $2.35B. It's been a rough couple of days for the stock, losing 5.18% over the last week.

6. Express Inc. (NYSE:EXPR): Operates specialty retail stores in the U.S., and has a market cap of $2.12B. The stock is a short squeeze candidate, with a short float at 8.42% (equivalent to 6.9 days of average volume). The stock has gained 13.99% over the last year.

7. Guess' Inc. (NYSE:GES): Engages in the design, marketing, distribution and licensing of apparel and accessories for men, women and children, and has a market cap of $2.64B. The stock is currently stuck in a downtrend, trading -6.36% below its SMA20, -10.12% below its SMA50 and -7.54% below its SMA200. It's been a rough couple of days for the stock, losing 6.97% over the last week.

8. Gap Inc. (NYSE:GPS): Operates as a specialty retailing company, and has a market cap of $12.49B. The stock has gained 17.69% over the last year.

9. Hot Topic Inc. (Nasdaq:HOTT): Operates as a mall- and web-based specialty retailer in the U.S., and has a market cap of $403.97M. Relatively low correlation to the market (beta = 0.43), which may be appealing to risk averse investors. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.33%, current ratio at 2.38 and quick ratio at 1.34. The stock is a short squeeze candidate, with a short float at 8.61% (equivalent to 7.45 days of average volume). It's been a rough couple of days for the stock, losing 5.88% over the last week.

10. Limited Brands, Inc. (NYSE:LTD): Operates as a retailer of women's intimate and other apparel, beauty and personal care products and accessories in the U.S. and Canada, and has a market cap of $13.71B. The stock has gained 29.21% over the last year.

11. Pacific Sunwear of California Inc. (Nasdaq:PSUN): Operates as a retailer rooted in the action sports, fashion and music influences of the California lifestyle, and has a market cap of $107.40M. This is a risky stock that is significantly more volatile than the overall market (beta = 2.47). The stock is a short squeeze candidate, with a short float at 12.77% (equivalent to 12.62 days of average volume). The stock is currently stuck in a downtrend, trading -9.14% below its SMA20, -16.89% below its SMA50 and -11.03% below its SMA200. It's been a rough couple of days for the stock, losing 9.14% over the last week.

12. Urban Outfitters Inc. (Nasdaq:URBN): Operates lifestyle specialty retail stores under the Urban Outfitters, Anthropologie, Free People, Terrain, Leifsdottir and BHLDN brands, and has a market cap of $4.17B. The stock has lost 7.99% over the last year.

13. Wet Seal Inc. (Nasdaq:WTSLA): Operates stores that sell fashionable and contemporary apparel and accessory items designed for female customers, and has a market cap of $297.17M. The stock is a short squeeze candidate, with a short float at 14.9% (equivalent to 12.16 days of average volume). It's been a rough couple of days for the stock, losing 8.64% over the last week.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Kapitall's Rebecca Lipman does not own any of the shares mentioned above. Data sourced from Finviz.

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