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Toys will always sell, 8 Toy Stocks to Buy in 2019

Melisa R. H. Posted On June 25, 2019
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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.

It’s also been more than a year after the liquidation of giant retailer, Toys ‘R’ Us, which had a seismic impact on toy manufacturers, Hasbro and Mattel.

Here are the top toymakers and sellers:

🎠 Toys
Canada Stocks

Spin Master Corp (TOY-T)

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.

Spin Master Corp (TOY-T) — Stockchase
Spin Master Corp (TOY-T) — Stockchase

It is a really well run company. It is a dominant player in the toy industry. The business is very lumpy month to month, year to year. Kids are sending more time on-line and not playing with toys.

stockchase.com stockchase.com

Canadian Tire Corporation Ltd (CTC-T)

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.

Canadian Tire Corporation Ltd (CTC-T) — Stockchase
Canadian Tire Corporation Ltd (CTC-T) — Stockchase

It is well run but is competing against online shopping. It gives exposure to only the Canadian shopper and you should consider multinational companies with consumers better off than Canadian consumers who carry a lot of debt, the most in the world.

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Indigo Books & Music Inc. (IDG-T)

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.

Indigo Books & Music Inc. (IDG-T) — Stockchase
Indigo Books & Music Inc. (IDG-T) — Stockchase

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.

stockchase.com stockchase.com

Fairfax Financial (FFH-T)

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).

Fairfax Financial (FFH-T) — Stockchase
Fairfax Financial (FFH-T) — Stockchase

Excellent management with Prem Watsa. 2021 a turning point in the business (net earnings up 15x, revenues up 34%). Struggling company that has turned the corner. Insurance business that is able to raise prices. Insurance float is positively affected by increase in interest rates.

stockchase.com stockchase.com

US Stocks

Mattel (MAT-Q)

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.

Mattel (MAT-Q) — Stockchase
Mattel (MAT-Q) — Stockchase

Stockchase Research Editor: Michael O'Reilly The long time toy manufacturer has worked hard to re-invent itself, partnering with Disney and Universal and reviving iconic brands like Barbie, Hot Wheels and Fisher Price. It even has pledged to use 100% recycled bio-based plastics. Its management during pandemic supply-chain threats were expertly handled as reflected in their…

stockchase.com stockchase.com

Hasbro Inc (HAS-Q)

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.

Hasbro Inc (HAS-Q) — Stockchase
Hasbro Inc (HAS-Q) — Stockchase

(A Top Pick Dec 09/21, Down 7.8%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with HAS has triggered its stop at $93. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 5%, when combined with the previous buy recommendation.

stockchase.com stockchase.com

Home Depot (HD-N)

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.

Home Depot (HD-N) — Stockchase
Home Depot (HD-N) — Stockchase

Reported a great quarter today, but shares fell She likes their different avenues of growth. HD's quarterly call was optimistic, such as a strong backlog. Share fell today because investors are worried what will happen 6 months from now, worries of a slowdown or recession and rising rates. But HD's PE has shrunk to 18x…

stockchase.com stockchase.com

Big Lots Inc (BIG-N)

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.

Big Lots Inc (BIG-N) — Stockchase
Big Lots Inc (BIG-N) — Stockchase

(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%.

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