The stock market rallied on broad-based strength on Tuesday, with both the Dow Jones Industrial Average (DJINDICES:^DJI) and S&P 500 (SNPINDEX:^GSPC) clawing back to within 4% of their all-time highs set a month ago. When all was said and done, the two major market indexes had climbed 1.6% and 1.2%, respectively.
Today's stock market
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As for individual stocks, Berkshire Hathaway (NYSE:BRK-B) (NYSE:BRK-A) stood tall as one of the S&P 500's top gainers following encouraging commentary from CEO Warren Buffett. On the other hand, a notable analyst downgrade left Mattel (NASDAQ:MAT) stock reeling.
A tough road for this toymaker
Shares of Mattel initially plunged as much as 8.6% early today, then partially recovered to close down 3.4% after analysts at Jefferies Group downgraded shares of the toys and games specialist to underperform from hold. Curiously, Jefferies also increased its per-share price target on Mattel to $13 from $12.50.
To justify its opinion -- and keeping in mind shares had rallied almost 9% this month in spite of disappointing holiday-quarter result from Mattel -- Jefferies stated that the company's ongoing turnaround is likely already priced into the stock, noting it faces "challenging industry conditions" and steep competition.
If that wasn't enough, on Friday credit-rating agency Fitch dropped Mattel's long-term issuer default rating by two notches to B+ from BB, arguing the Barbie and Fisher Price owner has suffered from its "inability [...] to effectively respond to evolving play patterns and ongoing retail challenges," particularly given the bankruptcy of Toys R Us late last year.
To be fair, Mattel has moved to aggressively improve its financial position, with operational efficiency and expense-reduction initiatives targeting $650 million of cost savings in the coming years. Mattel has also struck new partnerships with companies including China-based Alibaba and computing platform Tynker to expand the reach of its brands and better monetize intellectual property.
It will take time, however, for those efforts to yield more tangible fruit. And given increasing skepticism for Mattel's prospects on Wall Street, it's no surprise to see the stock pulling back today.
Warren Buffett's latest windfall
Meanwhile, Class B shares of diversified financial holding company Berkshire Hathaway jumped 3.9% today after its CEO (and famed investor) Warren Buffett offered a slew of reasons to be optimistic for its future in his annual letter to shareholders.
For one, Buffett says, Berkshire faces the enviable problem of finding the best ways to put its $116 billion cash pile to use. Berkshire has historically preferred to use its cash hoard for strategic acquisitions, which would add to its already enviable list of subsidiaries, including GEICO, General Reinsurance, Burlington Northern Santa Fe, Duracell, Dairy Queen, Fruit of the Loom, and dozens of other well-known brands.
But it's increasingly difficult to meet Berkshire's strict criteria for making such purchases at an astute price. As such, Buffett teased that Berkshire Hathaway would not be opposed to repurchasing its own stock at the right price.
Finally, in an interview with CNBC today, Buffett reminded investors that the recent reduction of the federal corporate tax rate from to 21% from 35% is a "huge tailwind" for companies in the U.S. This means that Berkshire's already massive cash hoard will only continue to grow.
Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares). The Motley Fool is short shares of Mattel. The Motley Fool has a disclosure policy.