Toys will always sell, but the toy industry faces serious headwinds. Toys are a highly cyclical business and, despite the S&P hitting all-time highs this week, an economic downturn is expected down the line.
Add to this the ongoing threat of tariffs in the US-China trade war which has prompted CEOs, including Hasbro’s, to lobby Trump to reconsider his tariffs.
Here are the top toymakers and sellers:
SpinMaster has been a growing strongly since going public in 2015, renown for innovation and in establishing a global brand, but the Canadian toymaker has been struggling lately. The street respects its management, but expects the stock to go sideways for a while.
(A Top Pick Feb 26/19, Down 30%) It's disappointing. The Toys R Us bankruptcy hit the sector harder than expected; peers like Target aren't as good as selling toys as Toys R Us. TOY has net cash and great balance sheet, though, and remains innovative with a good pipeline of toys. He's waiting to average…
Yes, the Canadian icon sells toys, lots of them, branding this department the Kids’ Zone. The stock itself is facing various headwinds from e-commerce and leverage from recent acquisitions that the company is still digesting. The recent pullback may offer a buying opportunity, though long-term prospects remain positive.
Iconic Canadian brand but operating in a very competitive space. Most products are AMZN-Q'able. They have the credit card business which brings in 25% of their earnings but it is essentially sub-prime lending. Loan losses are skyrocketing at a time when bankrupsies are skyrocketing. It is not timely from this perspective. They have been buying…
Canada’s dominant bookseller also offers a robust toy section, but Indigo has taken a hit after missing its earnings in the last four quarters.
Has had a huge run and is not sure he would be courageous enough to get onboard at this point. Management has done a remarkable job of building this. He would look for a little lower entry point.
Canada’s Berkshire-Hathaway has endured some big swings in its chart, but investors continue to bet on Prem Watsa’s investing acumen to steer his company to calmer waters with fresh investments in BlackBerry, India and even Toys ‘R’ Us (Canada).
(A Top Pick Sep 12/19, Up 2%) He still thinks Prem Watsa will deliver. FFH has a global reach and long-term commitment to India. $540-600 band is supportive, but he's looking for upside above $600-620. If so, this could go to $800.
Still one of America’s largest toymakers, Mattel has been struggling for the past few years in the face of e-commerce. Losing retailer Toys ‘R’ Us didn’t help. The latest CEO has yet to right this ship, while some investors hope for a buyout to end this company’s woes.
Not too long ago this company was on their short list. They are in trouble. They blown up their balance sheet and the returns are terrible. Hasbro (HAS-Q) has put up a potential bid out there and it would make a lot of sense. Your best hope is that buyout. It’s too risky. Maybe they…
In contrast to Mattel, Hasbro’s stock price has climbed over the past five years, despite Toys ‘R’ Us’ exit in early 2018. Business is so good that Hasbro even opened a movie studio along the lines of Marvel. However, Hasbro faces higher costs in the face of Trump’s tariffs in the face of the ongoing US-China trade war.
A huge, huge toymaker. It had a phenomenal run, but has pulled back, but it’s not that far off historical highs. Insiders own about 10%, which is quite a bit in a company this size, but they've been selling a lot of shares, which is a negative indicator. Pays a good dividend. Makes money year…
As the grown-ups buy tools, the kids play with toys at Home Depot. This sector has some insulation from e-commerce, so the stock continues to do well as homeowners renovate their houses in this late inning of the economic cycle.
One of the largest home improvement dealers and a play on the health of the US housing market and low interest rates. Household formation is still increasing and there will always be a need for home repairs. Yield 2.22% (Analysts’ price target is $240.59)
A big-box retailer like Costco and Wal-Mart, Big Lots has locations in the U.S., though it failed to break into Canada. Despite beating earnings the last two quarters and underoing a store remodeling campaign, Big Lots stock (and sales) has been struggling since peaking in January 2018.
(A Top Pick Aug 08/18, Down 54%) He sold last fall around low-$40's so didn't suffer the drop to the low-$20's (where this stock is now).