Rick Munarriz made a good call on JAKKS in an article he wrote more than a year and a half ago on stocks that were cheap but had a lot of value. Back then, the stock was trading under $10 per share; the shares would eventually reach a 52-week high of more than $24.
Even so, JAKKS closed yesterday's session down more than 22%. One of the big drivers of punishment is the risk posed by the lawsuit that World Wrestling Entertainment
Here's another concern: those joystick games. CEO Jack Friedman dubbed the performance of its TV Games toys a "dramatic success." He's right: They're very popular, and I get a kick out of them myself. (For those who don't know, there's a new kind of video game that allows consumers to hook a joystick device directly into a TV or VCR and play pre-loaded games, which are often perfect emulations of classic arcade properties such as Pac-Man and Galaga.) I am worried that this category is becoming hypersaturated way too quickly; there are so many varieties out now -- ones based on Activision
So, what should an individual do? If you've been looking at JAKKS as a potential investment, I think you're right to do so, but hold off on initiating a position. I would wait a bit more to see how the litigation is shaping up. There's value to JAKKS Pacific, in my opinion, as I believe it is a competent licensee and marketer of toy products. As always, though, each investor must perform his or her own due diligence and not rely on a single opinion.
For more Takes on toys and games:
- Check out LeapFrog Enterprises'
- Will there be no holiday for Hasbro
- Let's get serious about games.
- See why Mattel's Barbie has the blues.
Fool contributor Steven Mallas owns shares of Disney.