Hurco Not Out Of The Woods, But Investors Already Thinking Recovery

Trading below book value when I last wrote about (and recommended) the stock, Hurco (HURC) shares are up about 30% since then - more or less keeping pace with the broader industrial sector. As expected, Hurco's financials are getting pummeled by the sharp business downturn instigated by COVId-19, but investors have already started bidding up industrial stocks in expectation of a V-shaped recovery in many manufacturing sub-sectors.

While I do think Hurco will recover and that the shares are still priced for a double-digit long-term total annualized return, I'm concerned that industrial stocks have come back too far too fast. Given incremental updates on manufacturing end-markets and companies cutting spending to bare bones, I think it'll be at least another quarter or two before Hurco starts seeing evidence of a turn, but I think some of the worst-case scenario risk is leaving the table. All in all, I think Hurco is worth owning here, but I think we may see another pullback before the dust settles.

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Hurco Not Out Of The Woods, But Investors Already Thinking Recovery