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Author: dduct Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1220  
Subject: Was that my hound that howled? Date: 10/3/2000 2:26 PM
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Boy does this investment howl. But why? I looked at Hasbro today and did not feel like selling.

Look at Mattel. It has just finished losing money on the Learning Tree. $3 billion shot to hell. The HAS-hound has never lost anything like that on any investment. Good dog! Didn't soil our rug...

Both MAT and HAS have lost about the same in stock value (HAS since 1999; MAT since 1998). Bad dogs!

Consider this though. MAT is losing money and HAS is at a 13 PE. The HAS-hound is looking very nice! MAT has a debt-to-equity of 1.24; HAS is at 1.02. The HAS-hound may have stepped in it but it doesn't look like he will track it into the house. MAT sells at 2.87 times book; HAS at 1.31. The HAS-hound is priced lower and has good breath! MAT price-to-sales is at .96; HAS at .51. My hound is really bringing home the bacon (or is that Beggin?).

So what's wrong with HAS?

There is roughly $3 of EBITSA flowing through each HAS share versus less than $1 for MAT. OK, now that makes me howl(-:! Same stock price but one is 3x the performance level. Does anybody smell anything? Look behind the computer...

The HAS-hound should be howling a different tune. With such a low price-to-sales, a small margin increase will have a big earnings inpact. It has great asets so the book value does not appear to be overstated. The debt level is reasonable especially since the seven analysts covering the company are all predicting an earnings increase (from $1.10 to $1.55 a share in 2001). And the PE is way below the market average. So what's wrong with the HAS-hound?

It must be that the HAS-hound is a 'value' play. Value! Oh, that nasty word -- and 5 letters too. Sounds too much like earnings, low price-earnings, and a reasonably priced investment.

If this hound has bit your hand with a big loss, and it has bitten many of us, then all these sweet words may not be funny or encouraging. But before you take this dog to the Shelter, take a look in the dog house. Didn't we already pay for participation in 3 Star War movies? Doesn't our toy line-up look promising and profitable? Isn't there a lot of innovation in the product lines (music clips, talking toys, etc.)?

The Value Gods (Wall Street's Dog Catchers) are out raising the value of IBP today (another great looking company the market was ignoring). Let's hope they do not sell-off our HAS-hound. This pup looks like it has lots of life and should be best of breed -- and priced accordingly.

(-:
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