Buying Stocks As Gifts

Talk about the gift that keeps on giving.

Suppose, instead of answering that classified ad and shelling out $100 for Tickle Me Elmo last holiday season, you had presented your child with $100 worth of stock in the BellSouth Corp., a fast-growing "Baby Bell" telecommunications company that offers direct-from-the-company purchase of its shares.

The value of that stock a year later would be $169, with the increase in the stock's trading value plus dividends from a Dec. 7, 1997, purchase date to this Dec. 7.

Managing Your Money

Besides the pragmatic-minded's traditional gifts for children such as savings bonds, mutual funds, and passbook accounts, another alternative is stuffing some stock into that stocking.

"It's a great investment for their future and it's a great learning tool," said Dennis Fish, of Atlanta, who has been giving stock usually Coca-Cola as gifts to children of family and friends for years. "And it doesn't break like a toy gift might."

In addition to the potential long-term value, having their own stock certificate may entice children to track their company's performance and learn about the ups and downs of the stock market. And they may realize that Alan Greenspan's words can carry more weight than Puff Daddy's and that the "Asian contagion" isn't a new dance.

Internet trading, discount brokerage firms and direct buying from some 500 companies that offer that option can provide efficient ways for individual investors to buy stock. However, most require a minimum investment, usually ranging from $250 to $1,000, or have commissions that pile onto a gift's cost.

At least one company specializes in single-share gifts. One Share of Stock Inc., was started four years in San Francisco ago by Lance Lee, a broker struck by the number of people asking for small amounts of stock. Today, he not only offers single shares with pristine, frameable stock certificates, but even sells the frames for $30 to $50 extra.

For gifts large and small, advisers such as Charles Carlson, author of The Individual Investor Revolution, suggest giving children stock in companies they are familiar with.

One favorite gift is Disney Co. stock, whose colorful certificate depicts Walt Disney surrounded by his characters such as Mickey Mouse and Dumbo. One Share, which locks in stock prices twice a month, currently offers Disney for $81, $49 of which is a commission. Other brokers may also sell lesser amounts of Disney stock, but the minimum to make an initial purchase directly from the company is $1,000.

Other stocks younger players might relate to include Toys R Us, Hasbro, Mattel, McDonalds, Hershey and sports franchises such as the Boston Celtics, Cleveland Indians and Florida Panthers (and for adult tastes, there are such stocks as Anheuser-Busch, Harley Davidson and Playboy).

Along with the stock certificate, share owners receive the company's annual reports. Marvel Enterprises, home of such super-heroes as the Amazing Spider-man and the X-Men, has produced colorful reports that are particularly popular.

Although the lead time to obtain the stock certificates is up to eight weeks, One Share will ship a special gift notification for the holidays for only the cost of the delivery. People can buy through Dec. 23 and still have a certificate to the recipient in time for Christmas.

For larger investments, buying directly from the company is now possible for non-shareholders of some 500 stocks (if you already have stock, you can arrange to have some transferred to your child). An Internet site, www.netstockdirect.com, lists the stocks that allow direct purchases.

Among those with the lowest minimum is The Home Depot, the Atlanta-based home improvement retailer, which requires a $250 initial purchase, with a $5 fee and 5-cent-per-share commission added.

The company's stock was in the $54 range late this week, up some $25 from one year ago when this year's two-for-one split is factored in.

And, of course, there's a benefit for the companies that sell directly to the public - increasing the number of people who have a stake in their success.

"Our thinking is a good investor will make a good customer," said Larry Menter, a lawyer for Home Depot. "People are more apt to shop at a company where they hold stock."

Written By Dan Sewell, AP Business Writer