Six ideas to help calm 'money anxiety'; The two types of opportunities I'm looking for; A first look at Mattel

1) Compared with what we saw last week, the markets have been quieter over the past couple days...

And I don't want to cause more stress among my readers by sharing more bearish indicators (believe me, there are plenty).

So instead, I'll highlight this New York Times article from last weekend that has some good advice: How to Ease Your Money Anxiety When the Economy Is Stressing You Out. As the article notes, even before the economic chaos this year, folks' financial anxiety was already running high:

Four out of five Americans in a survey for Discover last year said they were worried about their money situation, with inflation, everyday expenses and the state of the economy leading a litany of concerns. Nearly two-thirds said they would be financially unprepared if they lost their job, and more than half felt the same way about a recession.

Now, tariffs and a global trade war, which could raise prices and discourage consumer and corporate spending, have economists raising their odds of such a downturn this year. Coupled with wild swings in the stock market, which is down about 9 percent for the year, it's no wonder that financial anxiety is spiking to new heights.

The article echoes what I've been saying in my e-mails recently – sit tight and don't make decisions when you're scared:

"The urge people feel to do something to make themselves feel better can be overwhelming," said Anne Lester, former head of retirement solutions for J.P. Morgan Asset Management and author of the book "Your Best Financial Life." "But it's hard to make sound decisions when you're scared."

Instead, the article shares six smart strategies:

1. "Adjust your perspective." ("Stocks still look like a smart investment for long-term growth.")
2. "Slow your roll." ("Pause and be thoughtful and take time on decisions rather than reacting on emotion.")
3. "Don't look at your balances. (Really, don't.)" ("Investors with long-term goals who rarely check their accounts end up earning significantly higher returns on average than those who monitor more often.")
4. "Imagine the worst." ("Identifying your biggest fear about your financial situation now, then thinking about how you'd manage the fallout, can be a calming exercise.")
5. "Identify one move." ("Focus on what you can control, especially actions that could improve your financial situation in a downturn.") 
6. "Practice self-compassion." ("Tell yourself, 'I did the best with what I knew at the time.'")

2) Regarding No. 5, "Identify one move," the one move I'm always looking to make – and share first with my subscribers and then readers of this free e-mail – during times of turmoil is identifying a great stock to buy.

I'm generally looking in two places...

The first is among high-quality businesses that aren't affected by, or might even benefit from, the tariff turmoil.

A good example is CME Group (CME). It provides electronic trading globally for futures and options – just the kind of business that does well when investors (I use that term loosely – the correct word for most of them is "speculators") are panicked and trading like maniacs.

No wonder the stock (as of yesterday's close) is up more than 13% this year and is trading within a few percentage points of its all-time high.

I'll also note that my team recommended it in our flagship Stansberry's Investment Advisory newsletter back in January 2023. Subscribers who followed the advice to buy the stock in that monthly issue are up 67%.

(If you're an Investment Advisory subscriber, you can read the full write-up by my colleague Alan Gula right here. If you aren't, find out how to become one – plus access our entire archive, full portfolio of open recommendations and specific advice on positions, and receive our next 12 monthly issues that will each have our best current idea – by clicking here.)

The other type of stock I'm looking for is a good company whose stock has been crushed by fears about tariffs. And therefore, this kind of stock could soar if President Donald Trump ends up cutting deals – especially with China.

3) Along these lines, this article by CNBC recently caught my eye: Mattel and Hasbro stocks notch new lows after Trump's China tariff escalation. Excerpt:

The toy industry is heavily reliant on supply chains in China, leaving toy makers at the mercy of trade policy. Bank of America estimates that both Mattel and Hasbro source around 40% of their U.S. product from China...

Margins for toys are typically in the high single digits, meaning there's little wiggle room for companies to absorb the cost of these new fees. Expectations are that toy companies will need to pass on the entire cost of Trump's tariffs to the consumer through higher prices on the shelf.

These price hikes, which could see some toy product double in cost, is set to coincide with this year's back-to-school season.

So to wrap up today, I'll take my usual "first look" at Mattel (MAT). It makes numerous well-known brands of toys – including Barbie, Hot Wheels, American Girl, Fisher-Price, and Disney Princess.

Despite this, the stock has been a dismal performer, having actually declined over the past two decades:

In light of this, I wasn't surprised to see that revenue and profits have also been essentially flat over the past two decades:

Mattel's free cash flow ("FCF") has been consistently positive – other than two bad years in 2017 and 2018 – but hasn't grown much overall. Take a look at this chart of the company's operating cash flow, capital expenditures ("capex"), and FCF:

 Meanwhile, Mattel's capital allocation has been all over the map...

This next chart shows the various acquisitions, share repurchases, and dividends through 2017... then nothing for a couple years... then small but growing share repurchases in the past few years:

The balance sheet is decent, with the company paying down debt over the past five years:

Lastly, as of yesterday's close, Mattel has a market cap of about $4.8 billion. And with roughly $1.3 billion of net debt, that gives it an enterprise value of about $6.1 billion.

The stock closed yesterday at $14.92 per share. And with expectations for the company to earn $1.68 per share this year (up slightly from last year's figure of $1.62), that means it's trading at about 8.9 times this year's earnings.

That's a low multiple. But I think it's delusional to think that Mattel's earnings are going to grow this year, in light of the slowing economy and then adding in the catastrophic tail risk of tariffs. And yet, the stock is only down about 16% this year.

I think it should be down closer to 50%... so I wouldn't even be slightly tempted by Mattel's stock at these levels.

If tariffs kick in, the company starts losing money, and the stock gets cut in half – a very realistic scenario – then it might look more appealing for bottom-fishing.

Might Hasbro provide a better opportunity? I'll take a look tomorrow... Stay tuned!

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.