Toys will always sell, 8 Toy Stocks to Buy in 2019
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.
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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.
It is an amazing stock. Historically it has peaked 3 times at 2 1/2 X Book and then falls. It is back up to its peak again so time to sell.
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).
It is great business and has made good private investments. The share price is very strong relative to the market.
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.
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.
Stockchase Research Editor: Michael O'Reilly Although recently reported revenue missed projected targets for the quarter, margins are expanding thanks to cost savings. Earnings by this toy manufacturer beat expectations by over 20% and support a ROE of 21%. We like that cash reserves grew in the quarter despite retiring debt. It pays a good dividend…
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.
She's long both names, but their margins are getting squeezed. It's not an ideal place to be now. The backdrop are rising mortgage and interest rates. Mortgage rates just hit 7%.
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 Dec 08/20, Down 1.2%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with BIG has triggered its stop at $45. To remain disciplined, we recommend covering the position at this time. When combined with the previous recommendation to cover half, this results in a combined net investment return of 13%.