Jeff Morrison MegaBrands MB-T PAST TOP PICK Dec 27, 2002

(Market Call Minute) Broken company on the mend. Going to resume their growth pattern.

Warrants: expire two years from now. They have had problems for years and years but chart is starting to breakout here over the last couple of months. Warrants should cause a tremendous resistance at $10.

Long Mega Blocks Warrants (MB.WT-T) and Short Mega Blocks (MB-T). A pairs trade. Warrants are composed of 2 parts 1) time value and 2) the intrinsic value (“in the money” value). 2 years ago it was 100% time value because the share price was worth a lot less. Now in the money, the strike price is close to $10 and is currently trading at about $4.75. The warrant is trading at about $0.24.5. You are essentially getting the optionality of the warrants for free.

Long Mega Blocks Warrants (MB.WT-T) and Short Mega Blocks (MB-T). A pairs trade.

(A Top Pick April 23/13. Up 4.2%.) Went long on the warrants and shorted the stock. Still likes this strategy very much and this is one of his largest positions in his portfolio. Liked the Mega-Brand story but felt the warrants were mispriced.

Very positive. Could be taken out by Mattel. Good to hold toy stocks going into Christmas. He is short the common stock and long the warrants. There is a year and a half left in the warrants. This is how he plays megabrands.

Looked at it seriously recently. Has risen from the ashes. Re-stabilized the business. Must reinvent a good portion of their product line every year. Challenge will be to grow sales. It is fully valued here. Wait and see. Would buy if it got weak enough.

Numbers on toys hasn’t been great on a macro level, and there are some headwinds from a weak Black Friday. Q4 is always the biggest quarter of the year in terms of sales, so not a bad time to own it. He plays this through warrants. Goes Long warrants and Shorts the underlying common shares. Feels the warrants are mispriced and there is about 1.5 years left in them so he sees the optionality with the warrants.

(A Top Pick April 23/13. Long Mega Blocks Warrants (MB.WT-T) and Short Mega Blocks (MB-T). Up 63%.) Had identified the warrants as being mispriced.

(A Top Pick April 23/13. Long Mega Blocks Warrants (MB.WT-T) and Short Mega Blocks (MB-T). Up 63%.) Had identified the warrants as being mispriced.