Activision Blizzard, Inc. (ATVI), Mattel, Inc. (MAT): Buy These Consumer Stocks

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If you are bullish on the consumer economy, there are several stocks that you should consider. I recommend buying across multiple categories ranging from toys to gaming stocks. Below, I review two leaders in these respective fields and provide my take on why you should be optimistic about their futures.

Activision Blizzard, Inc. (NASDAQ:ATVI)

The innovative toymaker

Mattel, Inc. (NASDAQ:MATended 2012 with a bang. The results were generally strong with global net sales growth of 5%. Going forward, what makes me particularly optimistic is the company’s success in innovation: American Girl® saw global sales up 13% to offset slow momentum in Hot Wheels® and Fisher-Price®, which grew by 2% and 6%, respectively. The Barbie® brand also saw global sales drop by 4%. So, the company’s long-term growth story concerns maintaining stable brands while delivering momentum through new ones.

If nothing else, the company is a strong defensive investment off of a recovering economy. Dividends have been boosted by double-digits — continuing the company’s rich tradition of returning free cash flow to shareholders. This comes on top of the company repurchasing 2.3 million common shares for the fiscal year.

What attracts to me Mattel, Inc. (NASDAQ:MAT) is it’s simplicity. It: (1) develops cash cows; (2) innovates; and (3) returns free cash flow to shareholders. It’s a safe plan that has sent shares to their 52-week high and up 53% from the lows while paying a 3.2% dividend yield. With analysts expecting 9.4% annual EPS growth over the next five years, I believe the stock will outperform despite its stability.

For stronger upside, I recommend investing in LeapFrog Enterprises, Inc. (NYSE:LF). The stock is dirt cheap at slightly more than 7 times past earnings, and it is on a sharp growth curve. Analysts forecast 17.5% annual EPS growth over the next five years. With no debt and a current ratio of 6 times, LeapFrog is an ideal takeover target. As the leader in educational electronic toys, it can add considerable synergistic value to a suitor.

The always-growing game maker

Since its founding, Activision Blizzard, Inc. (NASDAQ:ATVI) has made several acquisitions in an attempt to improve its product portfolio and increase global presence. In 2011, the company acquired Beachhead Studios to further efforts in development of Call of Duty games — a strategy that has been paying dividends in light of how they have won back-to-back awards.

Some of the games we expect to see from Activision Blizzard, Inc. (NASDAQ:ATVI) in 2013 include The Walking Dead, Destiny and Deadpool.

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