The adage “Invest in what you know” has been espoused by investors like Warren Buffett and Peter Lynch to describe a simple philosophy: Invest in the businesses you understand and use. But what do teenagers know that you don’t?
Gen Z, which includes people born between the late 1990s and early 2000s, is a generation on the precipice of adulthood. And they like to spend: according to a new research report from investment bank Piper Sandler, teens between 13 and 19 spend a total of roughly $67 billion per year based on self-reported survey data, which is up 4% since fall 2022 and up 2% since last year. Fifty-sevent percent of teens cited Amazon as their favorite online shopping site. As this group ages into adulthood, their spending power will only increase, and many of their favorite products will stand the test of time.
Recently the analysts at Piper Sandler dug into what this generation is spending on, and which stocks are poised to benefit. They have "overweight" ratings on all 10 stocks below.
1. Crocs (NASDAQ: CROX)
This notoriously unfashionable footwear brand is back in. “Notably, Crocs gained the most share among males,” explained senior research analyst Abbie Zvejnieks. Piper Sandler gave the stock an overweight rating and a price target of $165. Shares currently trade at $129 and the stock is up an impressive 20% year to date. Crocs also owns the brand Hey Dude, which was ranked number eight in favorite footwear brands among teens, and is taking market share from shoe brand Vans, according to researchers.
2. e.l.f. Cosmetics (NYSE: ELF)
This cosmetics and skin care company is the reigning queen for Gen Z makeup fanatics. The brand maintained its spot as the number one preferred makeup brand for all teens. Its skin care vertical is also giving the brand a boost as it entered the survey's top 10 category for skin care for the first time this quarter. e.l.f.'s stock gained 900 basis points since last year. The brand was given an overweight rating and a price target of $90. Currently, shares trade at $85, and the stock is up an eye-popping 53% year to date. (Here you can read Sheryl Estrada's interview in Fortune with e.l.f. CFO Mandy Fields after the company hit 16 straight quarters of net sales growth in February.)
3. Align Technology (NASDAQ: ALGN)
Braces are out. And the company leading the way for clear aligners that straighten teeth is Align, which makes the popular Invisalign retainers. “ALGN was the far and away leader in the ortho category, with 86% of teens opting to choose Invisalign as their preferred clear aligner brand,” explained analyst Jason Bednar. “Despite increased competition from new entrants in the market, we believe ALGN is positioned to maintain its leading market position through its ability to treat complex cases, the superior resourcing ALGN provides to the overall market (clinical education/support, branding, advertising), and significant geographic expansion potential,” he added. Align’s price target is currently $360 as analysts give it an overweight rating. Shares currently trade at $339.
4. Lululemon Athletica (NASDAQ: LULU)
The athletic apparel brand Lululemon has maintained its top spot as a Gen Z favorite this year. The brand is the number one favorite athletic apparel brand among upper-income female teens, according to Piper Sandler's survey. “Importantly, Lululemon was the number three favorite overall apparel brand among teens, increasing among males to the number five apparel brand,” wrote researchers. They gave the stock an overweight rating and a price target of $390. Shares currently trade at $367, and the stock is up 14% year to date. “We believe this points to the continued brand affinity for Lululemon, especially among the newly acquired younger cohort, which should support strong full-price selling,” Zvejnieks wrote.
5. Amazon (NASDAQ: AMZN)
The online retailing giant continues to dominate e-commerce across generations. “We continue to view Prime and Amazon Shopping as a dominant teen franchise,” wrote analyst Tom Champion. With a price target of $123, analysts give the stock an overweight rating. Shares currently trade at $99 and the stock is up 16% year to date.
6. Apple (NASDAQ: AAPL)
Apple is far and away the chosen smartphone for teenagers. “Both the 87% iPhone ownership and 88% intention to purchase an iPhone metrics are near record highs for our survey,” explained Harsh Kumar and Kevin Barker. Analysts give the company a $195 price target and an overweight rating. Shares currently trade at $160, up $28% year to date.
7. Pinterest (NYSE: PINS)
The image-sharing site saw increasing monthly usage of about 35% among teens, according to Piper Sandler's research. “With PINS, we see 'Many Ways to Win' amidst (1) strong Ad Buyer survey results, (2) improving user trends, and (3) capital return & margin expansion,” wrote analyst Tom Champion. The stock has a price target of $32. Shares currently trade at $28, and the stock is up 23% year to date.
8. Twilio (NYSE: TWLO)
The communication services company is heavily used by teens for texting. The company has a price target of $83 and an overweight rating from analysts. The stock currently trades at $59 per share and is up 18% year to date. “Messaging is the number two [communication for customer service with teens] and one area that showed the most incremental growth over the last few years,” wrote analyst Jim Fish.
9. General Mills (NYSE: GIS)
It may come as a surprise, but the food manufacturing conglomerate is popular among teens for its brand Nature Valley. “Of those who listed Nature Valley as their favorite snack brand, net 66% of teens plan to eat more or the same amount of it over the next six months,” explained research analyst Michael Lavery. Lavery put an overweight rating and a $95 price target on the stock. Shares currently trade at $87, and the stock is up 5% year to date.
10. Etsy (NASDAQ: ETSY)
The handmade-goods retail website is drawing in teenagers. “We think that ETSY is gaining momentum with the teen consumer and appeared as the sixth most popular website for upper-income teens,” explained Edward Yruma, senior research analyst with Piper Sandler. Researchers gave the stock an overweight rating and a price target of $140. Etsy currently trades at $103 as of April 11, and the stock has fallen 9% year to date, while analysts expect it to see a future boon.
This article is part of Fortune’s quarterly investment guide for Q2 2023.