3SOF

JAKK issued another press release about its business activities, not that anyone is reading:

• JAKKS Pacific(R) to Offer Toys & Activities Based on Preschool Property Max & Ruby
PR Newswire (Wed 6:00am)

JAKK is already trading at bear market multiples and I don't see any effect in its business from a possible recession in the US.

I'll keep on holding JAKK for the long term.

JAKK was the Main's best performer yesterday (it wasn't difficult ). I hope Hanna Montana, Cheetah Girls and Plug it in and Play TV games can contribute handsomely to JAKK's revenues in the second half, because that would certainly help investors expand the stock's earnings multiple.

This is because investors don't like the company's excessive dependency on WWE action figures, which are a matter of litigation (but that's just in Japan as we've seen, the undervaluation is unwarranted).

I've made a small value calculation of Jakk using the "Buffet" method.

I have been very conservative for the growth parameters (7% and 3%) and I've been severe on the amount of outstanding shares  (32m instead of 28m, mentioned in 10-K).

Results:



If you see some errors, or if you have any remarks, please tell them and I will adapt the model.

QuoteIf you see some errors, or if you have any remarks, please tell them and I will adapt the model.

Thanks for the very interesting analysis Fré. I think this is the DCF (Discounted Cash Flow) method, but considering the book I've read about Warren Buffet's methods (Buffetology), he doesn't use it, does he?

Anyway, I think whatever fundamental analysis angle we choose to pick, the conclusion is always the same: JAKK is undervalued and about to go higher.

Technical analysis was also bullish, but because of an 8 cents miss (of an overall $2.39 probable EPS for the year) the stock fell 40% in a couple of weeks and technical analysis is mixed now.

Probably it wasn't because of my e-mail, but JAKK started selling its Plug it in & Play TV games in Europe, I saw them for sale this weekend in Fnac stores here in Portugal. The only problem is they're selling the games at 34.99 euros each (approximately $47), while in the US they sell them for $19.90. How come the European price is 136% higher than the US price?

I'm going to e-mail the company on this issue.

Anyway, the games were spectacular. Even my wife wanted to buy "Pacman" for her to play. But I said "I'm going to order this from Amazon UK for less than half the price".

I'll keep holding JAKK for the long term.

Quote from: David Randolph on August 20, 2007, 07:49:28 AM

QuoteIf you see some errors, or if you have any remarks, please tell them and I will adapt the model.

Thanks for the very interesting analysis Fré. I think this is the DCF (Discounted Cash Flow) method, but considering the book I've read about Warren Buffet's methods (Buffetology), he doesn't use it, does he?

It's the DCF method allright, based on a book studying Buffets investment methods. It's the only book I've read on Warren Buffet so far, so I can't doudble check.
I can only say that it's about the same as mentioned on www.validea.com (which also covers the Buffet investment method).

Quote from: Fré on August 20, 2007, 12:51:31 PM

Quote from: David Randolph on August 20, 2007, 07:49:28 AM

QuoteIf you see some errors, or if you have any remarks, please tell them and I will adapt the model.

Thanks for the very interesting analysis Fré. I think this is the DCF (Discounted Cash Flow) method, but considering the book I've read about Warren Buffet's methods (Buffetology), he doesn't use it, does he?

It's the DCF method allright, based on a book studying Buffets investment methods. It's the only book I've read on Warren Buffet so far, so I can't doudble check.
I can only say that it's about the same as mentioned on www.validea.com (which also covers the Buffet investment method).

What's the name of your book Fré? I would like to buy it, thanks

I've just sent an e-mail to JAKK's Consumer Relations asking why is it that the retail price in Portugal for the Plug it in & Play TV games is 135% higher than in the US.

JAKK rose 0.92% yesterday, nice. I think the worst case scenario is priced in and the company just needs to meet or not miss by much on its full year guidance for the stock to push higher above $30.

Quote from: David Randolph on August 21, 2007, 06:49:38 AM

Quote from: Fré on August 20, 2007, 12:51:31 PM

Quote from: David Randolph on August 20, 2007, 07:49:28 AM

QuoteIf you see some errors, or if you have any remarks, please tell them and I will adapt the model.

Thanks for the very interesting analysis Fré. I think this is the DCF (Discounted Cash Flow) method, but considering the book I've read about Warren Buffet's methods (Buffetology), he doesn't use it, does he?

It's the DCF method allright, based on a book studying Buffets investment methods. It's the only book I've read on Warren Buffet so far, so I can't doudble check.
I can only say that it's about the same as mentioned on www.validea.com (which also covers the Buffet investment method).

What's the name of your book Fré? I would like to buy it, thanks

I've just sent an e-mail to JAKK's Consumer Relations asking why is it that the retail price in Portugal for the Plug it in & Play TV games is 135% higher than in the US.

JAKK rose 0.92% yesterday, nice. I think the worst case scenario is priced in and the company just needs to meet or not miss by much on its full year guidance for the stock to push higher above $30.

It's from the author of the following website: http://www.smartcapital.be/. It is however in Dutch, so I don't think it'll help you a lot.

I'll take a closer look on Jakk the next days and I'll probably take a position.

QuoteIt's from the author of the following website: http://www.smartcapital.be/. It is however in Dutch, so I don't think it'll help you a lot.

Unfortunately I don't know Dutch, but thanks anyway Fré

QuoteI'll take a closer look on Jakk the next days and I'll probably take a position.

I hope you do. I've been very confident in JAKK since the first day I bought the stock, but unfortunately a weaker than expected Q2 took it down extremely hard and fast. But I remain confident that in the end JAKK will be a great long term investment.

JAKK's management puts a lot of faith in Hannah Montana's dolls and related products for the second half of 2007. It seems they're already available at ToysRus, has anybody seen them?

Here's a brief article about the launch, and considering the reviews from the 5-8 year old fans, I guess it's going to be a huge success: Hannah Montana Dolls For Release This Summer

JAKK may even surprise everybody and post a higher than $2.39 EPS for the full year. Nobody really knows, but the market is pricing in the worst case scenario of a weak 2nd half ahead. I don't think that's going to be the case.

I'll continue holding JAKK.

David,

I dont know about the dolls specifically but i have 2 girls under 10 and I can tell you that they and all of their friens are obsessed with all things Hannah Montana.

jim

I still have my doubts about investing in JAKK:

-It's cristal clear that the co. is undervalued when you it compare to Marvell and Hasbro; and I don't see a reason for that.

-New exciting products are being released in the 2nd half of '07 which should give a boost to the company's revenues and earnings. The question however will be if that's enough to get $2.39 (or more).

-Margins stay at around 9% which is nice.


*On the other hand: 4% (earnings) growth isn't very much (for 07 and 08).

* The undervaluation has been here for 5 years and there are no signs that it will disappear.

* Risk/Reward is ok, but with the current market I'll try to find other bargains.


Conclusion: JAKK remains an interesting cash machine with upside potential, but it's also very sensitive. I'll monitor the stock very closely and I'll try to get in at $20-21.
Untill then, I'll be looking for other promising stocks.

Quote from: jdmark23 on August 22, 2007, 10:48:18 AM
David,

I dont know about the dolls specifically but i have 2 girls under 10 and I can tell you that they and all of their friens are obsessed with all things Hannah Montana.

jim

Thanks for your testimonial Jim

In the CEO's words, nobody knows the market potential of Hannah Montana related products, "but it can be HUGE". We'll see how things go in the 2nd half.

If indeed it is huge, it will have two effects on JAKK's valuation. First, the stock will rise because the company will meet or exceed its 2007 full year guidance and the market is now pricing in a disappointment. Second, the earnings multiple will expand from the current 10, because the company found a new revenue stream that will reduce WWE's exposure, which is what dents the valuation of the stock.

Quote-It's cristal clear that the co. is undervalued when you it compare to Marvell and Hasbro; and I don't see a reason for that.

It is because of the litigation between JAKK and WWE. The market anticipates that in 2009 the collaboration between the two companies will end, taking out the most important revenue stream for JAKK. But I don't think that's going to be the case, because WWE and JAKK relationship goes back more than 20 years and the litigation is about a minor issue in certain Asian countries, an area that provides less than 2% of revenue for JAKK. JAKK's CEO actually designed the very first WWE action figure. Moreover, it is possible that other products will reduce WWE's importance in JAKK's revenues and profits.

Quote*On the other hand: 4% (earnings) growth isn't very much (for 07 and 08).

Nobody knows how much earnings growth will be in 2007 and 2008. Expectations are low, but I think the company will beat those expectations.

Quote* The undervaluation has been here for 5 years and there are no signs that it will disappear.

There are signs, let's see if they materialize.

Quote* Risk/Reward is ok, but with the current market I'll try to find other bargains.

That's OK, good luck (and let me know what you find)

QuoteConclusion: JAKK remains an interesting cash machine with upside potential, but it's also very sensitive. I'll monitor the stock very closely and I'll try to get in at $20-21.

$20-$21 is possible, if the stock decides to make a double bottom or something like that.

Thanks for your comments jdmark23 and Fré I'll keep holding JAKK for the long term.

Until there are more earnings news investors will probably have "JAKK missed the quarterly estimates" on their heads and nothing will make it approach $30. Anyway, I'm confident the 2nd half will be at least as good as expected by the company's management, and that will be enough to put it at $30. If the numbers turn out being better than expected, the $35-$40 range will be within reach.

I love the company's products, especially Hannah Montana and Plug it in & Play TV games, which I think will be a huge success this Christmas. I'll patiently keep holding JAKK.

Here's a quick update for JAKK:
JAKK's recent sell off was unusual from a technical perspective, so personally and considering this stock was deeply penalized I expect the pullback move to be also uncommon... There are not much to tell from the chart, volume was very high during the lows, which is a characteristic of selling climax, the recent low volume should have bullish interpretation suggesting the lack of sellers on this stock, volatility should remain high but in general for the upside.

Portfolio Instructions:
Hold JAKK

Best regards,

Chart Update:
JAKK started the session very well and crossing above the ema-200, but the general market behavior was not helping, and JAKK closed far from the intraday highs, but still in positive territory which was good inside this context. Volume was higher suggesting an attempt to break this consolidation zone.

Portfolio Instructions:
Hold JAKK

Regards,

Rich Smith from Motley Fool published this article about Mattel after the close:
http://www.fool.com/investing/value/2007/08/28/mattel-finds-its-wallet-in-el-segundo.aspx
With this paragraph mentioning JAKK:

Quote(...) I don't mean to rain on Barbie's tea party here, but I just don't see the logic behind a buyback at today's prices. Mattel is priced a bit higher than its peers, with the exception of Hasbro. Personally, I'd be much more inclined to invest in either of the two smaller toymakers -- RC2 or, even better, the as-yet untainted-by-China JAKKS, than in Mattel (...)

Chart update:
A considerable fall today in response to the general market and once again showing the EMA-200 is an active resistance.

Portfolio Instructions:
Hold JAKK

Regards,