LeapFrog Enterprises, Inc. (LF) creates highly recognizable, quality learning content for children’s education with through its children’s toys, and the company’s solid brand and balance sheet positions the company for more opportunities going forward, says Eric Kuby, Chief Investment Officer of North Star Investment Management Corporation.
“One of our top holdings where we still think there is a nice opportunity is LeapFrog Enterprises, the company that makes the reading learning games for little kids aged three to seven. This is a company that we’ve followed since they went public, and I’d say probably two years ago I had started to think they actually had gotten it right. They’ve got tremendous content, a great brand name, really good distribution, a phenomenal balance sheet, and they were starting to grow,” Kuby said.
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LF‘s potential opportunities are coming from a market misunderstanding, Kuby says, that LF is a device company that is competing with Apple Inc. (AAPL). However, Kuby views the company as more content-oriented, and says that LeapFrog‘s content is unparalleled in the industry and driving the company’s value.
“They’ve developed over a long period of time this world-class content that can’t be replaced. If you are a parent of a three- or four-year-old and you want to buy them something fun to play with but that you also know is going to have stuff that you want them to learn and play with, and you see the LeapPad, you know that’s what it is. So it’s really the content that is driving it, and that content has a lot of other value,” Kuby said.