Thursday, January 5, 2017

Houston Wire & Cable May Be Past The Worst

There's an old piece of investing advice that says investors shouldn't reach for falling knives. In other words, don't buy the stock of a company based upon its recovery prospects while the company is still in decline. That's all well and good as advice goes, but the reality is that the market is a forward-looking place, and if you wait for concrete evidence of stabilization and improvement, you will definitely miss some of the upside.

This comes to mind with Houston Wire & Cable (NASDAQ:HWCC), as the company has logged almost three straight years of double-digit quarterly revenue declines and significant margin and free cash flow erosion. On the other hand, metal-adjusted MRO sales were up in the last quarter, and sales are expected to rise year over year for this fourth quarter. The shares got a good post-election bounce (before a roughly 10% pullback), and there are definitely risks that the power gen and oil/gas markets will remain weak for a while, but all in all, the risk/reward trade-off here looks interesting albeit high-risk.

Continue here:
Houston Wire & Cable May Be Past The Worst

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