Sometimes, you can't believe that a stock isn't up even more than it was. That's how I am feeling about Hasbro (HAS) and Illinois Tool Works (ITW) this morning even after their stocks were the second and seventh biggest gainers for the S&P 500 in yesterday's trading.
Until last night when I interviewed Brian Goldner, the CEO of Hasbro, on Mad Money, I had no idea about how much there was that could go right this year. For example, while I thought there would only be one Star Wars edition, it turns out that there is a Star Wars short coming out in the summer that could cause a whole wave of toy buying.
Initially, I didn't think that much about the idea of the Hasbro "Crate" -- the subscription gaming service that the company is launching -- until Goldner explained to me that you'll get three never-before played games chosen by gaming experts specifically for you. How can you not sign up for that? Dollar Shave Club's huge. This could be bigger for a company as small as Hasbro.
Sure, I knew about the new Guardians of the Galaxy -- fabulous toys connected with that -- and about the company's animated My Little Pony feature. But I didn't know about the Hasbro YouTube collection that's been seen my millions and millions of people and has no real cost associated with it.
Yes, the company's stock did hit an all-time high before reversing, but I truly think there's a lot more there.
For Illinois Tool Works, all I can say is that the company has so much room to grow in each of its areas of expertise, that I think it would be foolish to let the stock go. Especially when there are just six buys, nine holds and one glaring sell, from Goldman Sachs.
It's hard to get your arms around what makes ITW so great. When you hear that the company is all about 80/20 -- meaning finding the 20% of the business that brings in most of the profit and concentrating on those customers -- it seems so simple. Until you realize that most in the industrial sector aren't thinking that way. They are developing product and hoping companies will buy it. That's too random for ITW.
When I listened to Scott Santi, the CEO, talk about how he's only got $35 in parts per car in his fastest-growing business and he thinks he can get to $200 per car, who am I to doubt him?
The issue, of course, with ITW is that the stock's too expensive. However, it has always been too expensive. Even when it does a rare slip, as it did a couple of years ago, it never got cheap enough to make a real valuation case.
Now, though, with demand picking up worldwide, particularly in Europe, I don't know why we would expect the stock to come down. You need a really powerful market-wide selloff to derail the stock now.
But what's more likely is that some of those analysts who have a hold or sell on the stock capitulate and upgrade it, just propelling the darned thing higher, even as it already sells at 22x earnings because of its remarkable consistency.
Yep, ITW and HAS, hard to see what takes them from here.
You have to be ready, though, because if the market delivers a punch to the midsection of all stocks, these are two that are certainly worth buying.