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Posted May 7, 2009 On Roller Coaster Toy Companies The roller coaster ups and downs of toy companies results in very profitable years and years of great losses - high stock prices followed by low stock prices. Naturally, some investors do not like that. I imagine that large and highly desireable institutional investors would not like that. Whether wise or no, I don’t invest in toy stocks because of that volatility and because I am already invested up to my ears in the toy industry in other ways. Toy company executives have traditionally made money through salaries and bonuses, but Hasbro management has found that they can make more money on the valuation of their company stock and options. Their goal is to maximize shareholder value for all stock holders and to maximize their own personal incomes - to create a stable stock price without the wild swings and fluctuations of the past, with a steady upward trend, and in do doing, attracting investors who might otherwise not be interested in a toy company stock. To accomplish this they are managing their product lines more like a consumer product company like Procter and Gamble, where product lines live forever. Lines like Transformers, Star Wars, My Little Pony and others that have come and gone in the past, are now being managed as brands with the goal to remain on the market growing steadily year on year, forever. Smart, very smart. But just a little boring. This has some profound implications for us and our business, no doubt. I wish I knew what they are.
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