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3 Stocks Your Children Will Brag About Someday

Buying stocks in great companies and holding them for many years has proven to be one of the best ways -- if not the best -- for the average person to build wealth. Sometimes, the very best investments can turn into generational wealth, with stocks that get passed down as part of your legacy to your heirs. 

We asked three of our contributing investors to write about a stock that they think has the potential to be in your portfolio when your kids are grown up and will be worth significantly more than it is today. They came up with precious metals streaming company Franco-Nevada Corp (NYSE: FNV), century-old (and still relevant) tech-stalwart International Business Machines Corp (NYSE: IBM), and leading wind-turbine manufacturer Vestas Wind Systems (NASDAQOTH: VWDRY)

These three stocks could help you leave a bigger financial legacy for your kids. Image source: Getty Images.

Renewables have a huge tailwind

Jason Hall (Vestas Wind Systems): Global energy investments have been steadily shifting toward renewables for years. And this trend is almost certainly going to accelerate going forward, as both wind and solar technology gets better and cheaper, and energy-storage technologies render "baseload" power from fossil fuels unnecessary. 

I'm not talking about a "war" on fossil fuels led by government regulators. I'm talking about a complete disruption in your kids' lifetimes as renewables get cheaper than fossil fuels. 

This has Vestas, a market leader in the manufacture, installation, and servicing of wind turbines, in a wonderful position to still be a valuable part of your portfolio when you pass it along to your kids. How big is Vestas? To start, it's in three times as many wind-turbine markets as industrial energy giant General Electric. It also installed 33% more energy-producing turbines than GE last year. 

As demand for renewables continues to accelerate, Vestas' scale as one of the world's biggest turbine makers gives it numerous competitive advantages, including economies of scale. Its geographic diversity also adds to its strength, while its growing services-revenue base lends more stability to cash flow during cyclical demand shifts. 

Put it all together, and Vestas is positioned for decades of growth ahead and could very well be a big part of your financial legacy. 

A smart way to bet on gold

Neha Chamaria (Franco Nevada Corp): Gold stocks can be volatile and unpredictable, but one company has silently moved its way up in recent years -- so much so that the stock has been a five-bagger in the past decade. I'm talking about precious metals streaming and royalty company, Franco-Nevada.

It all boils down to Franco-Nevada's business model, which leverages investments to the prices of gold and silver at lower risk, simply because the company doesn't own or operate mines, but buys gold and silver from miners at discounted prices in return for funding them upfront.

Thanks to the inherent advantages of the streaming business, Franco-Nevada's production and revenue are setting new records year after year. The company has also ventured into oil and gas royalties, which could open up huge growth opportunities in the coming years.

Franco-Nevada projects its gold equivalent ounces to grow 14% by 2021, and oil and gas revenue to double in the next decade. As the company's profits and cash flows expand, investors can cash in on higher returns. In fact, Franco-Nevada is also among the best gold dividend stocks, having increased its dividend for 10 straight years. It currently yields 1.2%.

While gold can be a risky investment, Franco-Nevada is a smart way to play precious metals. Given the streamer's growth plans, performance history, and dividend record, your children will likely brag about owning this stock someday.

IBM has major staying power

Reuben Gregg Brewer (International Business Machines Corp.): There's no other technology company with a history like IBM. Founded in 1911, it started out making meat slicers and scales. Few companies have been as successful at reinventing itself multiple times.

The company is at it again. This time, it's moving away from low-margin businesses like building computers and moving toward higher-margin fare like cloud computing, artificial intelligence, and security. It's been a tough transition, with sales lower on a year-over-year basis for more than five years.

Turning a ship of IBM's size is not a quick or easy task. Concerned investors have punished the shares, opening up an opportunity for you and your children if you believe that IBM will once again change with the times.

IBM data by YCharts.

Time is of the essence, however. In the third quarter, IBM's year-over-year revenues were down again, but only by 0.4% -- which is basically flat. And its new businesses are still growing, accounting for 46% of revenues. When it gets to 50%, the outlook for IBM starts to look far more positive.

Investors pushed the shares up by 10% following the release, but it still yields 3.7% and has a P/E ratio of 13.5. Both fall squarely in value territory. If you believe in IBM's ability to adapt, buying today will give you bragging rights when time proves you right.

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Jason Hall owns shares of Vestas Wind Systems. Neha Chamaria has no position in any of the stocks mentioned. Reuben Gregg Brewer owns shares of IBM. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.