JAKK

[BigSully1]

David, I think you should definitely sell JAKK and pursue better prospects. Even though it appears to be very undervalued, it may very well remain that way, or even become more "undervalued",  IMO. I assume you haven't seen this article?

http://biz.yahoo.com/seekingalpha/070501/34069_id.html?.v=1

[yukiii]

David, I think you should definitely sell JAKK and pursue better prospects. Even though it appears to be very undervalued, it may very well remain that way, or even become more "undervalued",  IMO. I assume you haven't seen this article?

http://biz.yahoo.com/seekingalpha/070501/34069_id.html?.v=1

Yeah thats what I said no growth 10 pe stock.  Should never have been selected for 3sof.

[David Randolph]

David, I think you should definitely sell JAKK and pursue better prospects. Even though it appears to be very undervalued, it may very well remain that way, or even become more "undervalued",  IMO. I assume you haven't seen this article?

http://biz.yahoo.com/seekingalpha/070501/34069_id.html?.v=1

The article doesn't tell me anything new. I disagree with it, especially the dividend part. It's ridiculous to say that a dividend paying stock deserves a higher earnings multiple. Read what Buffet says on the issue, he doesn't like it when companies pay dividends, because of taxes and the loss of the compounding effect.

Also, the "there's no growth" thesis isn't accurate, the company has been growing revenues and EPS. Revenues were $315 M in 2003, $574 M in 2004, $661 M in 2005 and $765 M in 2006. This is very strong growth, it doesn't matter if it was due to acquisitions or organic growth.

Yeah thats what I said no growth 10 pe stock.  Should never have been selected for 3sof.

I guess TCHC would have been better, no?

You already gave your opinion on JAKK, are you going to repeat it everyday the stock goes down? I hope not, unless you have new arguments or information.

I'll keep holding JAKK, great value with strong growth.

[BigSully1]

It's fine for you to disagree with the article David. Just thought i would put it out there, since you seemed to trying hard to figure out why the seemingly low valuation.

Most recent Q'rly rev growth below 5 yr average, while earnings growth above. Current Q earnings estimate decreased. "Value" instititutions already own 95%, who is left to buy? Insiders own very little and don't appear eager to hold. I could be wrong, sorry, just my opinion.

[David Randolph]

It's fine for you to disagree with the article David. Just thought i would put it out there, since you seemed to trying hard to figure out why the seemingly low valuation.

Most recent Q'rly rev growth below 5 yr average, while earnings growth above. Current Q earnings estimate decreased. "Value" instititutions already own 95%, who is left to buy? Insiders own very little and don't appear eager to hold. I could be wrong, sorry, just my opinion.

Of course BigSully, thanks for sharing your concerns on JAKK, I think you're wrong, time will tell.

[akclide]

JAKK is a good company,but time is not on it's side.It is cyclical and with yesterdays retail report,it does look like consumer has slowed down a little.It will probably do okay in the long run.The question is are you willing to sit for 3-6 months to get fair return as opposed to follow the bull market and get better results for your money.

[BigSully1]

David, this is going to sound like I am just bashing JAKK. I'm not. I'm really unbiased here and just trying to be helpful. I started out looking for a good reason to buy JAKK and ended up fascinated with why this stock seems undervalued. I came up with a bit more today.

Evidently, WWE - World Wrestling Entertainment has a lawsuit against a joint venture controlled by THQI and JAKK, alledging they have illegally aquired the rights to it's name and franchise.

This could put JAKK's "Wrestlemania" and and "Smackdown vs RAW" video game prospects in jeopardy, and I believe this is where the majority of JAKK's future growth prospects lie.

Perhaps there is a "risk" discount on the stock per this lawsuit? Perhaps justifiably so?

Anyway, my research on this one is done and I wont say anymore on it. Hope I didn't offend. Good luck with it.

[David Randolph]

JAKK is a good company,but time is not on it's side.It is cyclical and with yesterdays retail report,it does look like consumer has slowed down a little.It will probably do okay in the long run.The question is are you willing to sit for 3-6 months to get fair return as opposed to follow the bull market and get better results for your money.

I don't think JAKK's cheap product sales will be affected by the economic slowdown in the US. Moreover the economy will probably pick up steam in the second half of the year, and most of the company's growth will come from international expansion, since international markets still account for just 12% of one year's sales.

I also believe JAKK is on the verge of a bullish breakout to new all time highs.

David, this is going to sound like I am just bashing JAKK. I'm not. I'm really unbiased here and just trying to be helpful. I started out looking for a good reason to buy JAKK and ended up fascinated with why this stock seems undervalued. I came up with a bit more today.

Evidently, WWE - World Wrestling Entertainment has a lawsuit against a joint venture controlled by THQI and JAKK, alledging they have illegally aquired the rights to it's name and franchise.

This could put JAKK's "Wrestlemania" and and "Smackdown vs RAW" video game prospects in jeopardy, and I believe this is where the majority of JAKK's future growth prospects lie.

Perhaps there is a "risk" discount on the stock per this lawsuit? Perhaps justifiably so?

Anyway, my research on this one is done and I wont say anymore on it. Hope I didn't offend. Good luck with it.

Of course you didn't offend BigSully1, I thank your research

I didn't knew about that lawsuit, but my take is the company's growth will come from international expansion, more than from product innovation (of course, it is also needed). The stock is so cheap, trading at 10 times earnings, that even if there isn't any revenue and profit growth the price per share should rise. The earnings yield is about 10%, and revenue and EPS have been very stable in the past.

BigSully, you gave us valid explanations to why JAKK is undervalued, but I think you're missing the main point which is: JAKK is undervalued. Therefore, it will rise.

I'll keep holding JAKK for the foreseeable future, it is the 4th most attractive stock of the Main Portfolio.

[Fré]

Another Stock picking website (Validea.com) selected JAKK a few weeks ago as Value Investment Stock. Their filter selected it as a stock Warren Buffet/Benjamin Graham would pick.

[Houlahan]

I am not vested in JAKK, but Wallstreet was chatting about Hasbro & Mattel this am. Both companies sell popular stuff/toys like Spiderman & Transformers, they are expected to do very well this summer.  As you know, they released a new Spiderman movie and for the first time a action figure is going to the movie box, instead of the other way around. Movie comes out, then they make action figures. I thought they had a transformer cartoon, but I am not sure.

I do not know if JAKK sells anything related to Spiderman or Transfromers, if they do, you could see an increase in sells for the 3Q.

[David Randolph]

Another Stock picking website (Validea.com) selected JAKK a few weeks ago as Value Investment Stock. Their filter selected it as a stock Warren Buffet/Benjamin Graham would pick.

Yes, I think JAKK would fit their criteria, since the company has been profitable for the past 10 years and has been growing earnings steadily. It is also trading at about 10 times 2006 EPS.

I am not vested in JAKK, but Wallstreet was chatting about Hasbro & Mattel this am. Both companies sell popular stuff/toys like Spiderman & Transformers, they are expected to do very well this summer.  As you know, they released a new Spiderman movie and for the first time a action figure is going to the movie box, instead of the other way around. Movie comes out, then they make action figures. I thought they had a transformer cartoon, but I am not sure.

I do not know if JAKK sells anything related to Spiderman or Transfromers, if they do, you could see an increase in sells for the 3Q.

I don't think so Houlahan, JAKK doesn't own the rights to those two trademarks.

As I look to my valuation model applied to JAKK, I see a reasonable picture:

1) Dilution factor of 1.01. This means I expect 1% average annual dilution going forward. Historically this number has been 1.022, but since the balance sheet got a lot stronger lately (the current ratio rose to 4.34 from 3.24 in Q4 2006) I expect just 1% going forward.

2) Revenue CAGR of 1.17. 17% average annual revenue growth seems reasonable to me, since revenue grew 15.55% in 2006, 26.3% in 2005 and 65.8% in 2004. Especially because only 12.5% of revenue comes from international markets and the company said it will increase its expansion overseas.

3) Net profit margin of 9.84%. This is the last 10 years average.

4) EPS multiple of 23.15 is the Toys & Games industry average.

The company's 2007 full year guidance points to $2.39 EPS, but I believe they're being extra cautious because they disappointed investors with last year's guidance. I expect a much higher number.

I'll keep on holding JAKK.

[David Randolph]

JAKK went down another 1.73% today. I'm now losing 9% on this stock. But the technical trend is still bullish (I'm talking about the medium term trend) and fundamentals appear to be extremely attractive, since the stock is trading at 10 times conservatively estimated 2007 earnings.

I'll keep holding JAKK.

[David Randolph]

Since JAKK disappointed investors in 2006, because it published a very high guidance and then couldn't deliver it, I guess the market is afraid that something similar may happen again in 2007. But my take is management learned their lesson and issued an extremely cautious guidance for 07, just $2.39 EPS compared to $2.3 in full fiscal 2006.

So, my expectation is for JAKK to positively surprise people going forward. JAKK is the 5th best stock of the Main Portfolio, I'll certainly keep on holding it.

[David Randolph]

Come on JAKK, you can't be trading at 10 times earnings, come on up, don't be such a drag. I'll say "thanks" when you breakout above $27.

[stocky]

David if P/E of 10 is such a low multiple for JAKK then why not consider stocks like VLO which have even lower P/E and also have better technicals. Agreeably its 42B market cap but there may be others with smaller cap and similar potential. I also agree that JAKK and VLO are in different sectors but the bottom line is still $$$ potential and valuation. So it may be time to put some gas in 3SoF portfolio.