"If Batman and Spiderman were stocks, which one would be the better buy?" Jim Cramer asked Tuesday on CNBC's "Mad Money." "How about Batman versus The Avengers?"
These scenarios aren't as far off as you may think, he said, because what he's really talking about is the ultimate battle of the toy makers, Hasbro versus Mattel.
While Hasbro owns the rights to make toys for all of the latest Marvel Comics-based movies and owns brands like Transformers, G.I. Joe and My Little Pony, Mattel has a similar deal with DC Comics — meaning merchandise . Mattel also boasts control over some of the strongest toy brands around, including Barbie, Hot Wheels, Fisher-Price and American Girl.
So, ahead of the holiday season — the most important time of the year for toy companies — what's the stock to buy here?
Based on revenue, Cramer said, Mattel and Hasbro are the two largest toy companies in the world, in that order. Both companies recently reported very strong quarters and have very similar valuations right now. In terms of dividends, Mattel yields 3.6 percent while Hasbro yields 4.1 percent. "This throwdown seems to be about as evenly matched as it gets," he said.
But the "Mad Money" host did offer an answer.
"When you drill down, Mattel beats Hasbro," he said. "Because at the end of the day, this contest is about girls versus boys and toys versus games."
Hasbro's line of products generally aims to appeal to young boys, while about two-thirds of Mattel's business is inclined to target young girls. Mattel is the leading toy maker when it comes to designing fashion dolls, and Cramer said targeting a female demographic gives the company the advantage of more consistent demand. "There will always be little girls who want Barbie dolls," he said.
On the other hand, roughly 42 percent of Hasbro's business is oriented toward boys, Cramer said the company has done well lately due in part to the successes of The Avengers and toy sales based on the latest Spiderman movie. But overall, the firm's still facing tough-to-beat comparisons from last summer when Hasbro "crushed the numbers" selling new Transformers toys in tandem with the latest Transformers movie. The stock was down 16 percent last quarter.
Mattel also gives investors a pure play on toys, while Hasbro exposes them to a number of puzzles and games like Scrabble and Monopoly, he said. And thanks to increasing online and game console competition, the board game business is getting crushed. "Games are a much smaller piece of the pie at Mattel," he said.
And while both Mattel and Hasbro delivered on the upside with their latest quarters, Mattel's quarter was much better than Hasbro's. The toy company's revenues were flat year-over-year, but its core brands were strong: Barbie was up 5 percent, Hot Wheels rose 11 percent, Fisher Price was 2 percent higher and American Girl was up 3 percent. As a result, shares of Mattel leapt 10 percent following the report.
Hasbro stock may have popped 4 percent on Monday because of better-than-expected earnings, but revenues were lower for the second quarter in a row — down 11 percent year-over-year. Cramer noted that Hasbro is also slightly more exposed to Europe than Mattel.
Valuation-wise, Mattel is trading at 12.7 times 2013 earnings estimates, which is slightly more than Hasbro's P/E multiple of 11.3. But Mattel also has a higher long-term growth rate of 8.5 percent versus Hasbro's 7.4 percent, and growth rate determines expense. Both stocks have a PEG ratio — P/E multiple divided by growth rate — of about 1.5.
Still, Cramer isn't suggesting buying Mattle right now. The stock has had a huge run since it reported a week ago, and the stock is only pennies away from its 52-week high, so he's waiting for a pullback here.
The bottom line: "Now, we know Batman beats Spiderman hands down," he said. Still, Cramer hates chasing and wants to wait for a pullback in Mattel before he tells you to pull the trigger.
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