Here’s Why Mattel (MAT) Became a Strong Performer in Longleaf’s Q4 2020 Portfolio

Longleaf Partners Small-Cap Fund, an independent investment management firm, published its fourth quarter 2020  investor letter – a copy of which can be downloaded here. A return of 17.56% was recorded by the fund in the fourth quarter of 2020, below its Russell 2000 benchmark that delivered a 31.37% return in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Longleaf Partners Small-Cap Fund, in their Q4 2020 investor letter, mentioned Mattel, Inc. (NASDAQ: MAT) and emphasized their views on the company. Mattel, Inc. is an El Segundo, California-based toy company that currently has a $7.03 billion market capitalization. Since the beginning of the year, MAT delivered a 15.70% return, impressively extending its 12-month gains to 129.95%. As of March 26, 2021, the stock closed at $20.19 per share.

Here is what Longleaf Partners Small-Cap Fund has to say about Mattel, Inc. in their Q4 2020 investor letter:

“Mattel (29%, 2.50%; 49%, 3.22%), the global toy and media company, was a strong performer for the year and the top contributor in the quarter. The company’s third quarter was excellent across the board. Barbie’s resurgence continued with 30% growth, leading consolidated Mattel revenues up 10%. Gross margins expanded by 400 basis points, and the quarter’s EBITDA came in remarkably high at $470 million (for an $8.6 billion EV company), partially due to shifting advertising spending back towards the end of the year. Mattel typically earns all its annual profit during the fourth quarter holiday rush, and we expect another excellent sequential performance to result in over $100 million FCF for the year. CEO Ynon Kreiz has delivered extraordinary improvements to revenues, expenses and culture since he took over in 2018. This year the company reacted to store closures in March with a successful quick pivot towards e-commerce sales. Mattel has also continued to build out its intellectual property assets with 10 feature films under development, as well as over 25 TV projects and video games. These high-margin projects have not yet begun to boost the company’s financial results and should prove transformative over the next several years. In the COVID environment, Mattel worked to manufacture PPE for donation to medical professionals and launched a “Thank You Heroes” collection with all net proceeds being donated to First Responders First. The company gave grants to Feed the Children and Save the Children and donated art supplies, games and toys to students in need.”

Our calculations show that Mattel, Inc. (NASDAQ: MAT) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Mattel, Inc. was in 25 hedge fund portfolios, compared to 26 funds in the third quarter. MAT delivered a 15.17% return in the past 3 months.