They say the pen is mightier than the sword, right? Well, would you believe that in the world of writing utensils, the pencil is mightier than the pen?
Apparently so. I read an amusing Reuters article last week on JAKKS Pacific (NASDAQ:JAKK) and its pencil-sized ambitions. I kid you not: The company is focusing in on the lowly pencil. When I think of JAKKS Pacific, the first thing that usually comes to mind is its lineup of "plug-in-and-play TV games." You know, those joystick controllers that have classic arcade games like Pac-Man and Galaga loaded within them?
As memorable as that lineup may be, JAKKS Pacific also puts out other goods, including action figures, arts and crafts, and stationery, which includes, of course, writing utensils. The company intends to market the Ultra Sharp Pencil under its Pentech brand.
What makes this Ultra Sharp Pencil so special? According to Reuters, the graphite in the Ultra Sharp doesn't need to be sharpened after use. Instead, a liquidized form of graphite lays down the lines. This endows the pencil with a much longer life than an ordinary one -- twice the life, it seems. And the liquid graphite material makes marks that are essentially no different from regular graphite marks, so if you'd like to use this pencil to fill in the bubbles on the Scholastic Aptitude Test while you sweat over words like "propinquity" and "hemidemisemiquaver," you are free to do so.
Who could have guessed that altering the DNA of the common pencil could drive a company's sales and shareholder value? The Ultra Sharp might do just that for JAKKS. The article states that the wholesale pencil industry in the United States is worth $600 million; furthermore, COO Stephen Berman was quoted as saying that this business "grows about six percent" annually.
Honestly, I wouldn't have thought that pencil sales grew that much, nor would I have believed that pencils, on a per-unit basis, outsell all other writing utensils. Just as people are either dog or cat persons, I'm a pen person -- ink conveys a higher sense of conviction, in my opinion. Pencils will always be with us, though, and they will always be in demand -- especially by the poor students who have to take the SATs.
Rick Munarriz covered JAKKS Pacific's earnings recently, and he believes that the stock might offer an investor significant upside potential. I concur with his thesis. And, heck, maybe this liquid-graphite thing will indeed capture more of the pencil market and, in turn, stimulate the company's Pentech sales.
Back-to-school season will soon be revving up, and JAKKS Pacific is hoping this new upgrade in pencil technology does its small part in helping the company score an "A" in shareholder value.
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Fool contributor Steven Mallas owns none of the companies mentioned. Although he thinks the pen may indeed be mightier than the sword, he admits that if he ever found himself in a fight, he'd choose a sword any day. The Fool has an ironclad disclosure policy.
