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.

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Houston Wire & Cable May Be Past The Worst

Investopedia: Industrial Slowdown? Not At Fastenal

If the economy really is teetering into a recession again, it is despite relatively encouraging rail traffic numbers and fairly strong sales trends at industrial suppliers. While Fastenal (Nasdaq:FAST) is unquestionably tied to trends in GDP and industrial activity, investors who overlook the consolidation and market share growth potential of this name do so at their own risk.

Earnings Still Growing at a Fast Pace  
Fastenal has more than one wind at its back, and the company has translated this into very solid growth during this economic recovery. For the third quarter, revenue grew 20% and slightly exceeded analyst expectations - a performance all the more impressive as the company routinely reports monthly sales figures. That said, there was some growth deceleration in September (growth was below 19% year on year), so investors should assume that analysts on the wrong side of this story will try to use that tidbit to validate continued pessimism.

Read the full piece here:
http://stocks.investopedia.com/stock-analysis/2011/Industrial-Slowdown-Not-At-Fastenal-FAST-GWW-HD-WCC-AXE-HWCC-DXPE1017.aspx