Tuesday, Mar 29th 2022

Titan Trade Update: Investing in the iconic, yet misunderstood, Hasbro

Investor Update

We’ve initiated an investment in Hasbro (HAS), the iconic toy, game and entertainment conglomerate with upside optionality for clients in our Opportunities portfolio. Also, as a part of our broader risk-on gameplan, we’ve also increased our position in Moody’s Corporation (MCO).

A trip down memory lane

Hasbro (HAS) has been selling toys, games, and entertainment since the 1960s, amassing an unparalleled portfolio of ~1,500 brands full of household names. Monopoly, Play Doh, Battleship, and Twister are just a few of childhood favorites owned by Hasbro, with these franchises proving to have lasting influence over the years.

In evaluating the investment opportunity in Hasbro, however, it wasn’t this legacy portfolio of toys that got us excited, but the opportunity we believe exists in the company’s role-playing and entertainment businesses.

Hasbro reports results across three major segments — consumer products, entertainment, and Wizards of the Coast. The first bucket includes most of the household toy and game brands mentioned above while the entertainment segment includes franchises like Peppa Pig.

Coast to coast

Wizards of the Coast (WOTC), a builder of role playing, trading card, and digital games was acquired by Hasbro in 1999. In our view, this is the sleeping giant within Hasbro’s business, and the segment that offers the greatest upside potential. 

Clients may be familiar with Dungeons and Dragons or Magic: The Gathering as games played by mathletes in high school; but many players have remained loyal to D&D, spending consistently on paper and online trading cards. With its maniacal fan base, strong network effects from MTG and D&D, and upcoming content releases, we believe there is a long runway for growth in this segment that is underappreciated by other investors.

There has been a push from hedge fund Alta Fox to spin out Wizards of the Coast into a standalone business, which they believe could be a huge unlock of value for shareholders, pushing the stock to $200/share up from ~$84/share. Although it remains to be seen if this spin-off will occur, we don't need a spin-off for this investment to be successful.

Dungeons and Dragons (D&D) and Magic: The Gathering (MTG) have grown revenues ~70% on a 2-year basis and ended 2021 with EBITDA margins of 47%. If WOTC continues to outperform, we believe there is a high likelihood investors could assign a higher value to this segment and, in turn, Hasbro’s business overall.

Not toying around

Turning back to Hasbro’s toys business, this segment has consistently grown sales faster than the industry over the last decade, with the only exception coming in 2018 when Toys “R” Us filed for bankruptcy and liquidated its holdings.

Toys remain a strategic category for many retailers, driving traffic and engagement, both in-stores and online. Even during slowing economic periods, Hasbro’s toys business has proven to be resilient, and we believe this portion of the business should provide some stability amid the uncertainties of the current economic environment.

Lastly, we remain cautiously optimistic on Hasbro's entertainment business.

We view the segment as a great call option given the lack of investor enthusiasm around current prospects for this segment. Brands like Peppa Pig are well established, but the recent success of TV series like Yellowjackets and The Rookie suggest a robust development pipeline. We believe this segment has the potential to make Hasbro both a content arms dealer amid the growth of the streaming business, while also offering the business upside via merchandise and related franchise growth through the gaming and consumer segments.

Overall, we’re excited to start a position in a business trading at a historically cheap valuation that offers upside potential and economically-resilient growth.

Slowly but surely

As noted in a recent trade update, we’re excited to continue to deploy our cash reserve that we’ve been building for months. We continued this trend by increasing our position in highly free-cash-flow generative Moody’s Corporation (MCO). Moody’s is a dominant leader in a duopolistic industry with strong pricing power, and should continue to provide stability in the Opportunities strategy amidst a volatile environment.

We plan to continue to deploy our cash reserves across all three portfolios into high-quality businesses that we believe are “on sale” over a long-term time horizon.

As we’ve said for weeks, we have a gameplan and we’re ready to execute on it.

Let us know if you have any questions about these moves and a member of our investor relations team will follow up.

Onwards, Titan Investment Team

As of this writing, MCO was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
Back to Research ↗

Learn with titan

Investment articles and resources

Become the smartest investor you've ever been through straightforward, easy-to-read investment articles.

Understanding the Different Types of Cryptocurrency


What Are the Different Types of Bonds?


What Is Securitization? Definition and Examples


What Are Liquid Assets & How Do They Work?

Let's Get Started

Ready to become a client?

Create an account with us in two minutes.

Or scan to get the app

We're building the best investment platform, ever

Titan Global Capital Management USA, Inc ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). By using this website, you accept our Terms of Use and Privacy Policy. Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities. Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance. Account holdings are for illustrative purposes only and are not investment recommendations. The content on this website is for informational purposes only and does not constitute a comprehensive description of Titan’s investment advisory services.

Refer to Titan's Program Brochure for more information. Certain investments are not suitable for all investors. Before investing, consider your investment objectives and Titan’s fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. The introducing Broker Dealer is Titan Global Technologies LLC, a registered broker-dealer and member FINRA/SIPC. Brokerage services are provided to Titan Clients by Apex Clearing, an SEC registered broker-dealer and member FINRA/SIPC. For more information, see our disclosures. Contact: 508 LaGuardia Place NY, NY 10012. Information provided by Titan Support is for informational and general educational purposes only and is not investment or financial advice.

© Copyright 2022 Titan Global Capital Management, Inc. All Rights Reserved.