9 Stocks That Make Great Graduation Gifts

Give the gift of capital appreciation.

Graduation season is here, and finding the perfect graduation gift couldn't be simpler. You could hand over the typical envelope of cash or -- if you're trying to win some hearts -- a car. But what value do such gifts really provide? The money will be spent by summer's end, and the car starts depreciating the moment it's driven off the dealer's lot. Instead, give the gift of capital appreciation with shares in a company that could be worth more -- perhaps a lot more -- five years from now, while teaching an investing newcomer about the stock market.

Berkshire Hathaway Inc. (ticker: BRK.A, BRK.B)

Not only is Berkshire Hathaway a piece of an iconic business run by the Oracle of Omaha himself, but owning it also gives the graduate a crash course in Warren Buffett's long-term investing strategy. "Every year, graduates will receive a copy of the Berkshire Hathaway Annual Report, including the shareholder letter that represents a master class in investing from Mr. Buffett," says Robert Johnson, president and chief executive officer of The American College of Financial Services in Bryn Mawr, Pennsylvania. And by owning companies from a variety of industries, Berkshire "generally won't be as volatile as companies concentrated in a single sector."

Walt Disney Co. (DIS)

No stock resonates with childhood memories like Disney. "What kid didn't grow up with Disney characters?" says Angelo DeCandia, professor of business and accounting at Touro College in New York. "This iconic company is embedded in our collective psyche, but had a bit of a downturn recently due to a missed earnings consensus in the fourth quarter of 2017." Given Disney's longstanding success, DeCandia thinks this may be a buying opportunity. The stock is trading closer to its 52-week low than its high with a price-earnings ratio of 17, below the industry average of 21. "Analysts call Disney's business model a 'profit multiplier' due to its ability to expand," DeCandia says.

Johnson & Johnson (JNJ)

Johnson & Johnson is for the bathroom what Disney is for the TV room. "From shampoos to deodorants, Johnson & Johnson is at the forefront of the personal care business," DeCandia says. "It's not a sexy company like Apple (AAPL) or Tesla (TSLA) or a media darling like Facebook (FB) and Twitter (TWTR), but it sure knows how to push out its products." It's not a bargain buy either, with a P/E of 24 and a current price midway between its 52-week high and low. But JNJ makes up for this with a dividend that's steadily increased for half a century, he says. It also has a conservative beta -- a measure of volatility -- of 0.7, meaning "it'll trail rather than lead a downturn."

Ryder System (R)

Ryder may not be as nostalgic a choice as Disney or as recognizable as Johnson & Johnson, but the moving van company deserves mention. Ryder vans are common campus sights on move-in day. And the company has expanded into supply chain transportation for the commercial market, proving that Ryder "may be the best-kept secret for retail investors," DeCandia says. The stock is no secret to institutional investors, who hold 91 percent of the company's shares. With an attractive 1.3 times book value, 0.52 times sales and a dividend yield near 3 percent, Ryder also can teach new investors how a "dividend buffers the ups and downs of the stock market."

Amazon.com (AMZN)

The best graduation gift stocks are those of companies that people can easily understand and follow, says David Yepez, investment analyst and portfolio manager at Exencial Wealth Advisors. He also suggests looking for "companies that are going to grow regardless of the economic environment." Amazon is "a true multi-industry disrupter," he says. It has a natural product monopoly and adds new products and services to its platform every year. This translates into the ability to "consistently grow their business for multiple decades," he says.

McCormick & Co. (MKC)

Also making good graduation gifts are shares of companies that provide a high return on capital, meaning they use the money you invest to grow their business at a higher rate than the competition, Yepez says. A good example of this is McCormick. As the largest spice and seasoning company -- it's four times larger than its nearest competitor -- McCormick can afford to invest more in research and development than its peers, Yepez says. And it dominates one of the fastest-growing aisles of the grocery store: "People want to cook more innovative food," which means using more spices, he says.

Zoetis (ZTS)

The graduate who is also an animal lover will really appreciate Zoetis, the world's largest producer of medicine and vaccines for pets and livestock, Yepez says. Pet health care is a big business, especially as people adopt more animals and spend more money to keep Rover and Fido healthy. For those reasons, Zoetis should continue to see positive growth, he says. The company is currently the leading producer of vaccines for dogs and even has canine drugs for cancer.

TJX Cos. (TJX)

"Most graduates are familiar with T.J. Maxx," says Kate Warne, investment strategist at Edward Jones in St. Louis. But it's only one of the five banners under the TJX umbrella. TJX specializes in off-price retail, which has less competition from internet sales, making it "better positioned than most retailers," Warne says. It also doesn't hurt that TJX has a dividend yield of 1.9 percent, which could "give a recent graduate a small source of income as well as long-term growth. We have a buy rating on TJX because we think it will be successful in continuing to grow sales profitability and open new stores," Warne says.

Facebook (FB)

You'd be hard-pressed to find a graduate who isn't one of Facebook's more than 2 billion users. "Owning the stock may be an opportunity to learn more about how Facebook makes money and the risks of fast-growing companies," Warne says. "Understanding how investors view Facebook may help recent graduates gain a different perspective, as well as help them develop more knowledge about investing." Warne's firm Edward Jones gives Facebook a "buy" rating thanks to its significant growth potential, but she warns its price is likely to be volatile.

Coryanne Hicks is an investing reporter for U.S. News & World Report. She is an expert at investing strategies and theories, investor education, investing psychology and behavioral finance. Previously, she was a fully-licensed financial professional at Fidelity Investments where she helped clients make more informed financial decisions. She has ghostwritten financial guidebooks for industry professionals and even a personal memoir. She is passionate about improving financial literacy and believes a little education can go a long way. You can contact her at crhicks@usnews.com.