Toy makers mostly rise with broader market

Wachovia analyst Timothy Conder said in a note to investors Friday that retailers are focusing on toys for kids below $15, in order to drive traffic amid a challenging holiday season.

"Additionally, to reduce seasonal inventory risk, retailers will increasingly focus on brands/products that have proven solid sell-through momentum," Conder added. In this case, Hasbro Inc., which makes toys including Playskool, Transformers and My Little Pony, is the best positioned, Conder said.

Also, toy makers, which have benefitted from the weaker dollar's positive effect on international sales, will begin facing foreign currency headwinds as the dollar has strengthened over the past two months against other major currencies.

Analysts have not yet taken this into account, Conder said. He lowered his profit estimates on Hasbro as well as Mattel Inc., which makes Barbies and Hot Wheels, and RC2 Corp., which makes toys and infant and toddler products.

Conder also downgraded RC2 to "Market Perform" from "Outperform" because its share price has risen 55 percent from its low in July.

Mattel shares fell 42 cents to $18.29, but otherwise stocks rose across the sector as the broader market soared on news the government is creating a plan to rescue the nation's troubled banks. Also, volume is heavier because Friday is a "quadruple-witching" day, during which investors often unwind positions in their futures and options contract before those contracts expire.

Hasbro shares rose 3 cents to $37, while RC2 climbed 44 cents to $26.07. Jakks Pacific Inc. gained 61 cents to $26.65, and LeapFrog Enterprises Inc. rose 27 cents to $9.82.