When everything is going down, the best mindset to have is a long term one. Longstanding stocks such as Spin Master Corp. has fared well over time in a volatile stock market, which is why it’s my top pick to invest in. Below I take a look at three key characteristics of what makes a strong defensive stock investment: its size, financial health and track record.
Check out our latest analysis for Spin Master
Spin Master Corp., a children’s entertainment company, creates, designs, manufactures, and markets various toys, games, products, and entertainment properties in North America, Europe, and internationally. Started in 1994, and headed by CEO Ronnen Harary, the company now has 1.88k employees and has a market cap of CA$4.1b, putting it in the mid-cap group. Generally, large-cap stocks are well-resourced and well-established meaning that a bear market will cause it to rejig some short-term capital allocations, but stock market volatility is hardly detrimental to its financial health and business operations. Therefore large-cap stocks are a safe bet to buy more of when the wider market is going down and down.
With zero debt on its balance sheet, Spin Master isn’t constrained to debt obligations and covenants, which can be burdensome during financial downturns. Highly-levered companies have to maintain a cash cushion to meet near-term interest payments as well as meet unforeseen circumstances. With no lenders’ needs to tend to, Spin Master enjoys financial flexibility and independence – an invaluable position to be in during bear markets. Its current cash position of US$144m is enough to meet near-term liabilities, placing it in a financially robust standpoint in the face of uncertainty.
TOY’s year-on-year earnings growth has been positive over the past five years, with an average annual growth rate of 35%, beating the industry growth rate of 16%. It has also returned an ROE of 23% recently, above the industry return of 16%. Spin Master’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.
Next Steps:
Based on these three factors, TOY makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy TOY, I highly urge you to understand more about the company, in particular, in these following areas:- Future Outlook: What are well-informed industry analysts predicting for TOY’s future growth? Take a look at our free research report of analyst consensus for TOY’s outlook.
- Valuation: What is TOY worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether TOY is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.