NOTE TO EDITORS: The Following Is an Investment Opinion Being Issued by Benchmark Journal.

SAN FRANCISCO, Jan. 2 (UPI) -- A judge in California said he would decide the fate of Bratz dolls for 2009 after its maker, MGA Entertainment Inc. was found to have violated copyright laws.

It probably pays a dividend.

Santa may be be the only person doling out toys this holiday season. Read on to find out what 2009 may bring.

Makers of handcrafted toys experienced a sales bump during last year's lead-paint scare -- when lax oversight from Chinese factories forced Mattel (MAT) to remove over 19 million items from shelves -- but a new safety ruling by the Consumer Product Safety Commission (CPSC) could force smaller toymakers to raise prices or go out of business. A federal regulation under the Consumer Product Safety Improvement Act -- which requires manufacturers to have products checked for lead paint by an outside firm -- goes into effect this week. The ruling was praised by concerned parents and smaller toymakers that have ...

Visit StreetInsider.com at http://www.streetinsider.com/news.php?st=p&id=4261950 for the full story.

Filed under: Law, Mattel, Inc (MAT)

Mattel (NYSE: MAT) and Bratz maker MGA Entertainment have been locked in bizarre litigation involving Bratz dolls -- those scantily-clad coked up Barbie wannabes that have been marketed aggressively to pre-teen girls. MGA lost an intellectual property lawsuit and is to give up control of the brand to Mattel sometime early this year. Mattel had sued, claiming that the creator of the dolls was working for Mattel when he designed the Bratz line.

But The Wall Street Journal reports (subscription required) that there is still considerable legal wrangling before the two parties as they work out a time line for the change of control. MGA Chief Executive Isaac Larian is hoping that his company will be allowed to continue manufacturing and shipping the dolls through 2009 so he can avoid laying off half of his company's employees. The matter is currently on appeal.

Financially, this doll fiasco could solve itself: The Bratz fad appears to be on its last legs. In September, I wrote that Target (NYSE: TGT) had slashed its Bratz shelf-space by 50% as sales of the dolls were expected to fall by 25% year over year.

Parents who don't want their kids to grow up to be like Paris and Lindsay should be pleased.

Bratz dolls face an uncertain future originally appeared on BloggingStocks on Fri, 02 Jan 2009 12:00:00 EST. Please see our terms for use of feeds.

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MAN AG Buying VW Brazil Unit; Siemens Settles Probe for $2 Billion; Mattel Pays $12 Million for Tainted Toys; Ireland Banks Getting a Bailout; Housing Market Facing Confidence Collapse; Boeing Raises Dividend; U.S. Homes Lose $2 Trillion in Value

• German manufacturing…

I haven’t posted in a while and thought I might begin with some random thoughts.

Rick Konrad of Value Discipline has posted after a (similarly) long absence. Value Discipline is one of the best investing blogs. If you’ve never read it - start now.

24/7 Wall St. recently posted on More Recession Carnage for Video Games. I would love to have posted on the video games industry (especially publishing) more often on this blog. I rarely have. The reason’s simple: video game stocks have been pricey for much of the life of this blog (2006-present). That’s not true anymore. Unfortunately, so many stocks are now so cheap on a normalized free cash flow (“earnings power”) basis that it’s hard to argue video game stocks deserve special mention.

Take toys. A basket of three of the largest U.S. toymakers: Mattel (MAT), Hasbro (HAS), and Jakks Pacific (JAKK) looks real reasonable. Do the math on what kind of free cash flow these businesses have produced over the years and what kind of prices you can buy them at today. Answer: You’re getting the American toy industry dirt cheap.

Are their risks? In the long-run, their may be greater risks in toys than video games, because toy companies run a greater risk of becoming inflexible enterprises. Regardless, mankind's appetite for toys, video games, and just plain fun isn’t going to be permanently impaired by a recession or depression (no matter how “great”).

Are these businesses recession proof? Nothing’s recession proof. But businesses that make products people are passionate about aren’t a bad place to be in any economic environment. The fact that both industries can and have supported multiple, profitable players isn’t a bad sign either. Toys and video game stocks are both worth buying (even if you can’t separate the wheat from the chaff) when you can get an acceptable no-growth normalized FCF yield on your purchase price.

Focus on free cash flow. Not earnings. I don’t envy anyone who has to tell us what a video game company (or toy company) made this year much less what they’ll make next year. Current sales and expected (normalized) FCF margins are a better way to value these businesses than EPS. Be conservative but realistic. And either buy the best or buy them all whenever you get the right price. In other words, don’t rush out and buy a troubled, hurting quagmire (THQ) at the first twinkling of a turnaround. That’s not necessary when real quality is on sale the way it is today.

Note: Yes. THQ (THQI) is cheap. But ask yourself: do I really need that kind of cheap in my life, when real quality's on sale.

Video game and toy stocks aren’t the only ones being offered at low prices to demonstrated free cash flow. See Microsoft (MSFT) or Energizer Holdings (ENR) for evidence of this market wide phenomenon.

But those are posts for another day.

Dividend Capture strategies are gaining popularity among speculators who don’t want to be too exposed to market risk, while also being able to pocket the dividends. My reader Ammar Husami asked me about my opinion on the subject. The dividend capture strategy is very different in comparison to my dividend growth ...

Schaeffer's analyst Colleen S. King takes a look at news on the Street before the market open.

Schaeffer's Colleen S. King takes a look at activity on the Street ahead of the market open

This was a contentious week for Mattel,Inc. The maker of the Barbie doll toys announced it was suing the maker of the Bratz toys, a growing competitor for stealing Mattel’s ideas. We asked 27 toy store respondents which toy is its hottest item? Are you currently sold-out of any hot item? Which is your best selling Barbie, and between the Bratz and Barbie, which sells best? 30% of those interviewed said that action figures are selling like hot cakes, while 11% said the Nintendo wii sells best. (Other items mentioned were video games, Elmo live , and anything to do with Hannah Montana.) 30% of those interviewed said they were selling out of Nintendo wii or some video games. 19 people or 70% however, said they were selling out of anything at all. And 52% contended that Barbie remains the best selling and superior doll. (Hispanic Barbie, Barbie Splash and Tooth Fairy Barbie were among those mentioned). 41% insist Bratz is best.

Tom Dorsey and Tammy DeRosier - Changes are a Comin'

Videogames and systems are the hottest selling items at ten (37%) of twenty-seven KB Toy stores surveyed by Tickermine. Action figures were hottest items at six (22%) stores. Barbie dolls and Webkinz animals were equally popular at three (11%) stores. Ten (37%) stores informed Tickermine that they had sold out of the reported hottest-selling item but seventeen (67%) stores had stock of their most popular items. Employees of five (19%) KB Toy stores reported that Beach Barbie is the best-selling Barbie doll this season followed by Barbie Baby Doctor at four (15%) stores. When asked whether Barbie was still number one, employees of ten (37%) stores said yes but employees at six (22%) stores were unsure.