Mattel: Barbie to Hot Wheels
11/29/2002 12:00 am EST
"We understand that it is psychologically difficult to buy when everyone else is selling," says Vahan Janjigian, editor of the Forbes Growth Investor. "But in the investment world, it often pays to go against conventional wisdom. The average investor wants to see a prolonged rally and improving economic indicators before moving back into stocks. By that time, however, they will have missed much of the upside." The latest addition to his model portfolio is a timely play on the holidays.
"Mattel (MAT NYSE) was plagued by problems several years ago, but under new management, the company has bounced back. Most people are familiar with Mattel’s toys. Perhaps Barbie, with more than 600 models, is the company’s most popular product. Hot Wheels cars are also very popular. The target market is young boys aged 5 to 15. The average collector has approximately 41 cars. Mattel is also a sponsor of many professional racing car circuits and its has renewed a licensing deal with NASCAR driver Ryan Newman to create Hot Wheels die-cast merchandise.
"American Girl is a relatively recent success. These products are based on a group of fictional young heroines who supposedly lived during crucial times in U.S. history. Mattel’s Fisher-Price division sells toys based on popular TV and book characters such as Elmo and Big Bird, Winnie-the-Pooh, and Disney’s Mickey Mouse. Meanwhile, some of its products are also popular with adults, such as Scrabble, Othello, Uno, and the Magic 8 Ball. Mattel also recently celebrated the 20th anniversary of its Masters of the Universe toy line.
"The upcoming holiday season is critical. There are concerns about consumer confidence and spending. However, established brands should do well. Finally, Mattel appears to be taking market share from Hasbro, its closest competitor. We last recommended that investors buy MAT in August 2001; the stock gained 18% in just under a year. Our quantitative model gives the stock high marks once again."