The Best Invest For Kids Stocks of 2015

The annual Invest For Kids conference was held last week in Chicago. The IFK conference brings together some of the hedge fund industry’s heavyweights to exchange investing ideas, while raising money for local kids.
Last year I laid out the top 3 picks from the IFK conference, with eBay (NASDAQ: EBAY) being the big standout. It’s up 30% since then.
This year featured another round of top money managers who offered insights on some of their best investments for today. Here are the top 3 Invest For Kids stocks of 2015:

No. 1 Invest For Kids Stock: CF Industries (NYSE: CF)

John Burbank of Passport Capital pitched CF Industries, noting that it’s been his biggest position for a couple years. CF might be one of the few commodity stocks worth owning. The company is a maker of nitrogen fertilizer and is down 10% year-to-date after the market frowned upon its purchase of OCI NV’s European and U.S. assets.
The transaction with U.K.-based OCI will be a tax inversion deal that will help save taxes, but it will also give CF greater global market share. OCI owns 5% of the global nitrogen fertilizer market share. The market is misunderstanding the deal and CF’s end markets.
CF still generates solid free cash flow and is growing product capacity. What’s more is that CF has a history of returning capital to shareholders. It has returned over 10% of its market cap annually to shareholders the last few years and has bought back 35% of the company since 2012.
The key catalyst for CF Industries will be the closing of the OCI deal, which positions CF nicely to capitalize on the rising demand for food globally. Passport expects CF to return close to $12 billion via buybacks and dividends to shareholders over the next four years, which equates to two-thirds of its market cap.

No. 2 Invest For Kids Stock: Berry Plastics Group (NYSE: BERY)

Cloud Gate Capital pitched Berry Plastics, which makes products like drink cups, bottles and other consumer packaging products. In fact, this is the largest consumer plastics packaging company in the world, although it has just a $4 billion market cap.
Low oil prices – a major input cost for Berry – are a tailwind for the company. Population growth should spur the demand for its products.
The company is also acquiring Avintiv, which is a leader in the plastic non-woven fabrics business. This will give the company purchasing power in the faster-growing polypropylene market, where there’s a lot of overlap in customers for the two companies.
Cloud Gate Capital thinks fair value is between $50 to $60 a share. The stock currently changes hands around $33 per share.

No. 3 Invest For Kids Stock: Royal Bank of Scotland (NYSE: RBS)

David Samra of Artisan Partners finally came around to the benefits of owning banks with his pitch of RBS. For the first decade of running Artisan, Samra didn’t own any bank stocks. But while everyone seems to be turning against banks, Samra is buying.
His reasoning is that a lot of complexity in the banking system has been removed since the 2008 financial crisis. Banks are now better funded with better assets and yet trade at cheaper multiples.
RBS is an underrated bank trading at 65% of book value following a pair of bailouts by the U.K. government, which owns nearly three-quarters of the bank.
However, since the financial crisis RBS has been turning around its business, which includes a doubling of its deposit base in seven years and a simplifying of its operations. It now has the highest Tier 1 capital ratio among large banks.
Going forward, RBS should excel as it continues to reduce its non-core assets to become more of a pure-play retail and commercial bank. Ultimately, Artisan sees RBS growing its market value by 80% in the next three to five years.
Conferences like this year’s Invest For Kids event are a great way to find underrated stocks that the market might be overlooking. You’ll find more of our favorites right here.