Smaller children don't spend much money because
their hands are too tiny to grasp $100 bills, but
they really can get their imaginations around toys
that let them create little worlds. That's the
reason I have become so interested in RC2
(RCRC:Nasdaq - commentary - research) this holiday
season. It is the distributor or manufacturer of
the Thomas the Tank Engine group of wooden train
toys, as well as Bob the Builder and all the Ertl
toy cars, and it apparently has emerged as one of
the strongest performers at stores this year.
RC2's share price rose from less than $1 in late
2000 to a high of $35.80 earlier this year, but
shares recently have settled back to long-term
support around $30. This is a seasonally weak time
of year for toy stocks because they tend to run up
in the spring during toy-wholesaling shows in
anticipation of a good holiday, and then drift
during the actual selling season. It would make
sense to start accumulating weakened shares now in
anticipation of the next markup period for toy
stocks.