Gamble of the week: Model maker back on track

Its products may be a throwback to our childhoods, but it's too early to call time on this model maker, says Phil Oakley. A speculative buy.

Right now, life is quite tough for toys and model railways group Hornby. Three profit warnings this year have seen the value of its shares chopped in half. A big bet on selling more toys on the back of the London Olympics has backfired for example, it made Scalextric sets based on a velodrome, and London bus models, which didn't sell very well amid a general glut of Olympic-related merchandise and it's now sitting on lots of unsold stock. It will have to slash prices to shift it.

On top of this, outsourcing the manufacturing of its model trains to China has been a nightmare. Unreliable suppliers have prevented Hornby from supplying enough products to key markets. These two factors, combined with tough markets, mean that Hornby won't make any money this year.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Explore More

Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.