The force is with institutional investors in Hasbro Inc., the toy company that produces plastic lightsabers and miniature Wookies.
The financial force, that is.
Investors in Hasbro are benefiting as the toymaker cashes in on the hype surrounding "Star Wars Episode I: The Phantom Menace."
Analysts predict Hasbro's sales will hit at least $500 million this year from Episode I.
But the company's real strength lies in the fact that it's not a one-franchise wonder, analysts and investors said.
Star Wars "is a big thing for Hasbro, but not the only thing," said Warren Koontz, a Detroit-based portfolio manager for Loomis Sayles & Co. LP, which owns a little less than 5 million shares of the toymaker, mostly in large-cap value portfolios.
"The stock is attractive for long-term investors," he said, stressing high sales of other Hasbro products such as the nattering Furby.
While Star Wars merchandise will be a "big plus" for the company this year, said Sheldon Simon, senior portfolio manager at Putnam Investments, Boston, the sale and development of new electronic toys will prove more important over time.
Hasbro has traded between 185/8 and 37 on the American Stock Exchange for the past year; at press time, it was trading around 321/4.
Shares hit a high of 37 at the beginning of May, when "Phantom Menace" products hit the shelves and toy hype was at its peak.
Mr. Koontz and other analysts said the stock could move toward $40 per share, but he acknowledged the 10% fallback from its early May high probably reflects the Star Wars hype and short-term investors taking profits.
Loomis, Sayles purchased the shares at an average cost of slightly under $20, he said.
Indeed, investors say they bought Pawtucket, R.I.-based Hasbro for its attractive valuations or dominant role in the toy industry.
Putnam owns close to 3 million shares. It made the buy in the middle of last year, when the company's valuations were at attractive lows, Mr. Simon said.
Putnam liked the company's future well before the force of the Phantom Menace. The money manager bought Hasbro "around the time Toys 'R' Us was trying to reduce inventories," Mr. Simon said. The price of Hasbro's rival, Mattel Inc., also dipped around that time, he said.
Mr. Simon mentioned Hasbro's low price-to-earnings, price-to-sales and price-to-book ratios at the time. "It was an attractive entry point for the stock," he said. "Hasbro was transforming itself," becoming a larger player in electronics and toys that use computer software.
Most of its Hasbro shares are in a $40 billion value fund, he said. He plans to continue to hold Hasbro as long as it fits Putnam's valuation model.
The New Jersey Division of Investment, Trenton, first purchased Hasbro shares in March 1996 for $36 per share, but since then has made additional purchases, giving it an average cost of $19 per share for the entire holding, said Steven Kornrumpf, director of the $75 billion fund.
Since February, however, it has sold close to 200,000. "There was some profit-taking here," he said, because the fund's analysts thought the "Star Wars hype" had already affected its price.
That leaves the pension fund with 538,000 shares.
"There's no secret what (Hasbro) has been doing with the movie," said Brian Arena, a portfolio manager with New Jersey.
"But, we sold a portion of the position because the stock seemed ahead of itself on the Star Wars news," said Mr. Arena.
He added the fund would hold stock for now.
U S WEST Investment Management Co., Englewood, Colo., which manages the $13 billion defined benefit plan for U S WEST Inc., owns 12,000 shares of the toymaker in a quantitative portfolio that uses the Russell 1000 as its bogey, said Kim Walker, president.
U S WEST bought the toymaker in February 1997, for its "attractive valuation characteristics," Ms. Walker said.
Those valuations, such as price-to-earnings, have grown, she said, adding U S WEST won't buy any more Hasbro at its current price.
Some investors prefer Mattel.
J.P. Morgan Investment Management Inc., New York, sold its Hasbro position in its $1.2 billion active growth equity portfolio in December, said Kathleen Tait, co-portfolio manager. She would not say how many shares the company held.
"We knew the stock would run (up)," she said. One reason for selling was that " 'Star Wars' was priced into the stock."
Another was that the analysts liked Mattel's long-term growth prospects more than Hasbro's.
A big plus for Mattel was its purchase last year of The Learning Co., a "major provider of the Internet and software to children," she said.