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.

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

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.

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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

Allan Tong’s Discover Picks Canadian Tire boasts a wide range of household goods at decent prices, but consumers will have much more choice in buying that patio set or baseball glove. True, last summer’s partial reopenings didn’t dent the stock price, but the Tire’s website still sucks. Price to cash flow is inline with its…

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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

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.

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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

Ultimately, when yields rise, income goes up. How much will yields go up? The global economy cannot handle higher interest rates. Insurance companies are doing better, but he does not expect it to last beyond the next 6 months.

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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

It delivered a great quarter yesterday, but the stock slipped today due to wider market ennui. Mattel is doing great under its CEO. It reported a top and bottom line beat with bullish guidance for 2021.

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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

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…

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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

It's still worth buying home improvement stocks like this despite a big run-up. People will continue to spend on their homes, seeing it as an investment, not as an expense. In any home boom, like now, people spend on home improvement. Also, we're entering gardening season.

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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

(A Top Pick Dec 08/20, Up 27.3%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with BIG has achieved its objective of $58. To be disciplined, we recommend removing 50% of the position and trailing up the stop to $45 (right around the original recommended buy level). This would all but guarantee a minimum return…

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