Over the next 25 years Millennials and Gen Z will inherit nearly $70 trillion from their Baby Boomer grandparents and Gen X parents. But many of them are not waiting for the windfall to start investing in stocks. So what stocks are they investing in? And should you buy them too?
Millennials, born between 1981 and 1996, are saving more than ever. A Bank of America survey found that nearly a quarter of Millennials that are saving have at least $100,000, with 28% of them investing in the stock market.
To be sure, many Millennials and older Gen Z Americans are saddled with crushing student debt and other financial obligations. Yet, they are also saving for retirement and investing in the stock market earlier than previous generations. A CFA Institute study shows that 31% of Millennials with taxable investment accounts began investing before age 21, vs. 14% of Gen Xers and 9% of Baby Boomers.
Younger investors have a keen interest in socially and environmentally responsible companies such as electric-vehicle makers, tech firms and cryptocurrencies.
Younger adults tend to favor high-risk, high-reward stocks, such as Tesla (TSLA), Advanced Micro Devices (AMD) and meme stocks such as AMC Entertainment (AMC). But they also like slower growth names such as Apple (AAPL) and Microsoft (MSFT).
Top Millennial And Gen Z Stock Picks
In Q2 2022, they continued to pump the breaks on growth stocks in favor of value stocks, according to the Apex Next Investor Outlook report. Like older investors, they appear to be concerned about rising interest rates and recession.
So Gen Z investors continue to focus their investing on traditional stocks throughout the second quarter, seeking safety in dividends over high-growth companies, the report said. As a result, Verizon (VZ), Home Depot (HD) and McDonald’s (MCD) rose significantly. Meanwhile, income-generating dividend players and energy stocks such as Costco (COST), Abbvie (ABBV) and Chevron (CVX) maintained investment momentum.
Apex, which analyzes the holdings of more than 1 million Gen Z accounts and over 5 million accounts held by Millennials, Gen X and Baby Boomers, publishes a quarterly report that shows generational investing trends.
Among Millennials and Gen Z investors in Q2 2022, the top stocks remained the same from the last quarter. Tesla ranked No. 1 again. Apple, Amazon (AMZN), AMC and Microsoft stock were again top 5 picks. The top 10 included Nvidia (NVDA), Disney (DIS), Alphabet (GOOGL) and Meta (META) (formerly Facebook). Chinese EV maker Nio (NIO) climbed three slots into No. 10 for Gen Z investors, knocking out meme stock GameStop (GME). Nio gained five spaces to No. 8 for Millennials.
Popular Millennial Stock: Tesla Stock
Tesla gained 36% in the last quarter of 2021, thanks to record deliveries. Tesla delivered 308,600 vehicles, bringing its 2021 total to a record-breaking 936,172. The EV maker also handily topped Q4 earnings despite having factories “running below capacity for several quarters as supply chain became the main limiting factor, which is likely to continue through 2022,” management said in a statement.
Tesla continued its streak with strong Q1 earnings, but the stock took a dive after CEO Elon Musk’s $44 billion takeover bid for Twitter was accepted by its board. But on July 8, Musk said he was pulling out of a deal. Twitter sued Musk to force the purchase. A lengthy battle is expected.
The EV maker also produced drastically fewer cars at its Shanghai plant in April due to Covid shutdowns and parts shortages. Tesla’s China May deliveries bounced back as production picked up with restrictions eased.
Nevertheless, Tesla delivered 254,695 vehicles in the second quarter, below estimates for 264,000.
On June 28, the White House said Tesla was working to open its Supercharger network to other EVs in the U.S. by the end of 2022, which means more revenue for Tesla. On June 24, the California Energy Commission proposed awarding $6.4 million to Tesla to open its supercharger network to other vehicles in four communities in California: Willow, Barstow, Coalinga and Baker. Rival charging company ChargePoint (CHPT) is also on the list, with roughly $4.6 million in proposed awards.
Meanwhile, Tesla plans to bring to a vote at its Aug. 4 shareholder meeting a 3-to-1 stock split. The event has been dubbed Cyber Roundup and will be held at Tesla’s factory in Austin. The stock split is seen as a way to increase demand for its shares. Lower-priced shares tend to be more accessible to everyday investors.
On July 13, Tesla AI chief Andrej Karpathy said he was leaving the company. Earlier, Musk said the company would lay off 3.5% of employees. He said that would result in a cut of 10% among salaried employees over the next three years, but added that Tesla would hire more hourly workers.
Tesla reported better-than-expected Q2 earnings on July 20. Shares soared 10% the next day.
TSLA shares are now trading around 909. MarketSmith chart analysis shows TSLA stock is not currently a buy. On a daily chart, shares are in a long consolidation with a $1,208.10 buy point.
Popular pick Amazon said on July 6 that it’s partnering with Grubhub to offer Prime members a one-year membership to the food delivery service.
The deal gives Amazon the option to take a 2% stake in Grubhub. Amazon could boost its total stake to 15% of Grubhub.
On July 21, Amazon announced it had about health care company One Medical for $3.49 billion.
AMZN stock is not yet a buy. Its relative strength line, which compares a stock’s performance vs. the S&P 500, is ticking downwards. Shares have pulled back in recent days, but are still trading above their 50-day line.
MSFT stock is not yet a buy, but its shares gapped up on April 27 on earnings and revenue that beat expectations. Microsoft bought Activision Blizzard in Q3 for nearly $69 billion.
The company cut its Q4 outlook. It said in a securities filing Thursday that it now expects fiscal Q4 sales of between $51.94 billion and $52.74 billion, down from prior guidance of $52.4 billion to $53.2 billion. It sees EPS of $2.24 to $2.32, down from earlier estimates of $2.28 to $2.35.
MSFT shares are trading below their 50-day line. Bloomberg reported on June 8 that Microsoft is laying off 400 workers in Russia, where it is winding down its operations after halting sales there following the country’s invasion of Ukraine.
Meanwhile, the company’s augmented reality chief, Alex Kipman, is leaving amid misconduct allegations.
Meme stock AMC may be a favorite among young investors, but MarketSmith chart analysis says stay away. Shares have plunged from their May 2021 peak. AMC’s relative strength line is trending downward, near lows not seen since June 2021. While revenue has rebounded from 2020 levels, when most theaters were closed, it remains well below pre-pandemic levels. AMC is expected to lose money through at least 2023.
In a move that baffled Wall Street, AMC said on March 15 that is bought a large stake in a gold-and-silver mining company. AMC is plunking down nearly $28 million in cash for the deal for a 22% stake in Nevada-based Hycroft Mining Holding, and an equal amount of stock warrants. The company, which used to be known as Allied Nevada Gold Corporation, has a history of financial woes.
Crypto Winter Looms
The Bitcoin craze captured the attention and wallets of investors young and old. But Gen Z, a generation that typically has less discretionary income to spend on risky investments, is perhaps more vulnerable to the so-called crypto winter many investors are expecting.
Despite Gen Z investors veering away from crypto stocks during the quarter, millennial investors remain bullish, particularly in the flagship cryptocurrencies of Bitcoin and Ethereum, the report said.
Apex says there were approximately 370,000 new crypto-enabled accounts opened in Q2, bringing total end crypto user accounts to over 4.9 million. Millennials represented 54% of crypto-enabled accounts, with Gen Z and Gen X each accounting for 21%.
See the full Apex Next Investor Outlook rankings here.
Follow Adelia Cellini Linecker @IBD_Adelia.
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