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.
The innovative toymaker
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.