Tuesday, December 1, 2015

Seeking Alpha: China's Economic Challenges Making Life More Difficult For HollySys

As a company that generates the lion's share of its revenue and profits from capital spending in China, the last year has not been an easy one for HollySys (NASDAQ:HOLI) (also sometimes written as "Hollysys"). Like Siemens (SI) (OTCPK:SIEGY), Rockwell (NYSE:ROK), ABB (NYSE:ABB), and the rest of the factory and process automation sector, HollySys has seen a sharp correction in demand for automation systems. While the rail system business has offset this to some extent, here too orders have been inconsistent.

It's difficult to strongly recommend a stock that is so heavily exposed to capital spending in China at a time when China's economic outlook is still murky at best. Patient value investors will argue that that's the time you want to go shopping, and while I agree with that sentiment, the reality is that investors considering HollySys's shares need to brace themselves for the possibility that the business hasn't yet bottomed and that there could be downside risk ahead of a recovery. I still believe that this company can be a high-single-digit grower over time, though, and the stock should trade closer to the mid-$20s.

Continue here:
China's Economic Challenges Making Life More Difficult For HollySys

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