Demographics are an underappreciated theme in investing. Over time, as demographic groups enjoy rising income and purchasing power, they drive an increasing portion of economic activity. And young people often set trends in fashion, consumer products, and media, making their tastes a key indicator of future investment returns.
This makes it a great time to consider America’s demographic themes. The Millennial generation is a large one, numerically speaking, and is enjoying significantly increasing economic power today. And the Gen-Z cohort after them is also making notable strides in the labor and housing markets.
How can investors cash in on these trends? These are three of the best stocks for Millennial and Gen-Z investors that can surf the demographic waves in the years to come.
Take-Two Interactive (TTWO)
Video gaming has become a dominant form of entertainment for younger people. Worldwide gaming revenues across all platforms (console, PC, mobile, etc.) have now topped $180 billion and have roughly quadrupled since the turn of the century. This makes video games much larger than other media formats such as movies or music.
Take-Two Interactive (NASDAQ:TTWO) has carved out a large role for itself within the industry. It owns leading development studios including Rockstar, 2K, and Zynga and is known for intellectual property such as Red Dead Redemption and Grand Theft Auto.
Take Two has been on a major growth spurt. Revenues are up from $2.7 billion for fiscal year 2019 to an estimated $5.3 billion for the current fiscal year. That said, profits have dipped recently amid a major slowdown in the gaming industry as spending cooled after the pandemic-era gaming boom.
While the industry is currently in a slump, analysts expect Take-Two to make a major leap forward in 2025. The company is slated to release Grand Theft Auto 6 next year, with some experts predicting that it will be the most important launch in the industry’s history. In any case, Take-Two’s impressive array of studios and IP set it up to be a dominant force in the industry for many years to come.
Dutch Bros (BROS)
Dutch Bros (NYSE:BROS) is a small, but rapidly growing coffee chain.
It currently operates approximately 912 stores, which may seem like a small number compared to Starbucks (NASDAQ:SBUX). However, Dutch Bros has nearly doubled its location count over the past few years. Meanwhile, Dutch Bros is still present in only 17 states; it has virtually no presence at all in the Midwest or East Coast yet, indicating that there is massive growth potential once it starts going into cities like New York, Chicago, and Boston.
Starbucks has long led the American coffeeshop marketplace. However, younger consumers appear ready for a change. Dutch Bros’ focus on sweeter and more colorful beverages helps them stand out. That especially plays well on social media, where Dutch Bros earns a lot of word-of-mouth advertising.
Dutch Bros has also put emphasis on its customer service and staff. Given the problems that Starbucks has had with unionization drives and a resentful workforce, Dutch Bros has made a good strategic decision in taking care of its employees.
BROS stock still represents an early-stage growth company and the firm isn’t particularly profitable just yet. But as it expands into more markets and Gen-Z’s purchasing power grows, Dutch Bros should be set to take off.
Zillow Group (Z) (ZG)
A 2023 study found that Gen-Z is buying homes at a surprisingly fast clip, with 30% of 25-year-olds owning a home in 2022. That tracks ahead of where Millennials and Gen-X were in terms of home ownership at that same point in their lives.
However, Gen-Z now faces the challenges of much higher house prices and rising mortgage rates, which limit their buying power in the housing market. All this makes Zillow (NASDAQ:Z) (NASDAQ:ZG) a great pick for younger investors.
Many investors know Zillow for its website and home price estimates. This franchise has been wonderful for building the brand. Under the surface, however, Zillow has built a whole housing services ecosystem including: Zillow Premier Agent, Zillow Home Loans, Zillow Rentals, Trulia, and StreetEasy.
Across its different verticals, Zillow offers mortgage origination, rentals, agent services, advertising, and new construction marketplaces. All this means that Zillow should be able to help younger Americans in almost every stage of their future home ownership journey. Zillow has also become increasingly profitable, shares now go for a reasonable 24 times estimated 2025 earnings.
Given Zillow’s rapid growth rate, shares should have significant upside from here, especially once rate cuts begin.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
