ALERT: A Hyper-Growth Stock I’m Holding Through 2020

Spin Master Corp. (TSX:TOY) is a contrarian growth stock that could skyrocket into the stratosphere.

| More on:
potted green plant grows up in arrow shape

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Spin Master (TSX:TOY) has been a tough stock to own over the past year. The mid-cap toy company has fallen at the hands of some hideous industry conditions.

Moving through the headwinds

The industry’s top retailer in Toys “R” Us went down (it’s now making a comeback!), and the void left a significant dent in Spin’s top line. The U.S.-China trade spat continues to unfold in the background, and a sluggish global economy has some analysts calling for lower (a 2% year-over-year decline) toy sales in the U.S. market.

Toy inventories are building up, and although the return of Toys “R” Us should relieve some of the pressure, it’s definitely not going to happen overnight.

With the stock down 33% from its all-time highs reached last year, Spin looks like a dead-money stock that’ll continue letting down investors that have come to expect high double-digit growth from the $4 billion toy maker.

Potentially underestimated with the potential to surprise in 2020

Most of the negativity has already been baked into Spin stock. The toy industry has been rough in 2019, but going into the holiday season, Spin has a chance to outshine its peers, as the broader industry looks to get back into high gear.

While U.S. toy sales are projected to decline slightly this year, I think Spin is in a position to take share away from some of its less-innovative bigger brothers. Moreover, Bank of Montreal Economics sees healthy, albeit slower U.S. consumer spending this holiday season, and that bodes well for Spin, which now has low expectations.

Spin took home seven Toy of the Year awards this year. And with a solid holiday lineup, Spin could correct to the upside in early 2020 upon release of quarterly results that include the holidays.

BMO named its top 10 toys for the 2019 holidays, with Juno My Baby Elephant (a Spin Master toy) making number four on the list. While number four isn’t that impressive considering the success of Hatchimals, it’s noteworthy that Juno was the only toy with a retail price of north of $50.

Juno is a tech-packed toy that’s going for $100, while seven of the other toys that made the top 10 were priced between $10 and $15. Juno is a big-ticket item that could really give revenues a boost, and with most other investors discounting the potential of the holiday season, I’d say that now is the time to pick up Spin stock before any preliminary sales figures have the chance to be revealed.

It’s not just Juno and the holidays that Spin shareholders should be excited about. Spin has ample dry powder to spend on acquisition opportunities. At a time of unfavourable industry conditions, I’d say the odds of getting a cheap deal are much improved for Spin. When the industry is at a low is when the most long-term value is created through M&A activities.

Foolish takeaway

There are headwinds, but there’s also a lot to be encouraged about, namely Spin’s toy lineup for the holiday season and the firm’s potential to pull the trigger on acquisitions that are rich with synergies.

Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette owns shares of Spin Master. The Motley Fool owns shares of and recommends Spin Master.

More on Investing

Target. Stand out from the crowd
Energy Stocks

3 Oversold TSX Stocks I’d Buy in Bulk

Recession fears impact oil prices, although three oversold stocks should remain resilient and generate substantial free funds flow throughout 2022.

Read more »

Stocks for Beginners

New Investors: 3 Top Dividend Stocks to Start a Simple Portfolio

These quality dividend stocks are worthy for new investors to consider for a simple passive-income portfolio.

Read more »

Dollar symbol and Canadian flag on keyboard
Tech Stocks

3 Top Canadian Growth Stocks to Buy in July

Here are three growth stocks you might want to add to your buy list in July.

Read more »

edit Four girl friends withdrawing money from credit card at ATM
Bank Stocks

CIBC Stock Could Be a Top TFSA Buy for a Rocky 2nd Half of 2022

CIBC (TSX:CM)(NYSE:CM) stock is a great dividend top pick to stash in a TFSA after the first-half market correction.

Read more »

exchange-traded funds
Dividend Stocks

2 Dividend ETFs With Significant Exposure to the TSX’s Top 2 Sectors

Two dividend ETFs offer ideal diversification because of their exposure to the TSX’s two strongest sectors.

Read more »

sale discount best price

RRSP Investors: Top Stock Pick on Sale After the Stock Market Correction

Quebecor (TSX:QBR.B) looks like a terrific dividend stock for RRSP investors to buy, as recession risks rise amid a market…

Read more »

edit Colleagues chat over ketchup chips

The Alternative Way to Look at Any Recession

Market down? Instead of losses, look for potential gains. This alternative way to look at any recession exposes a market…

Read more »

Arrow descending on a graph
Energy Stocks

Why Did Oil Stocks Crash so Suddenly?

Oil stocks like Cenovus Energy (TSX:CVE)(NYSE:CVE) crashed dramatically last week. Here's why.

Read more »