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The toy industry is not performing well during 1994, as more retailers are consolidating and toy manufacturers are cutting costs to survive. The industry is mixed as far as firms' outlooks go, with those firms that are branching out internationally looking brighter. Mattel Inc should do well for this reason. In addition, toy licensing is one of the main growth areas in the toy industry, and Mattel has contracted with Disney to make toys for all of its 1994 and 1995 films.

Toys stocks are a relatively risky investment, with short-lived products, intense competition, and no dividends available at some companies, such as Tyco and SLM International. Mattel is the only toy company of those tracked that is forecast to show above-average performance during 1995. The market for toys is expected to improve in the second half of 1994 after a poor performance during the first half.

The toy industry should experience strong growth in 1994 and 1995. Mattel, Hasbro, SLM International are expected to grow partly by acquiring smaller companies and partly through increased revenues generated in international markets. In addition to Tyco, the companies are expected to benefit from popular licenses. Investments in this group are mixed, with Mattel's stock rated as the most timely and SLM's stock having good prospects through the 1997-1999 period.

The toy industry will improve during 1994 as the economy improves, but industry firms' outlook will vary greatly in terms of performance. Popular toys in 1994 are ones with a connection with either a television show or a movie, and the bigger the movie or television show, the more the product sells. Industry analysts are forecasting strong long-term growth for industry firms, and SLM International offers above average growth opportunities.