Lately I've been going bargain hunting after these wild couple of days. As I've written before, I've more or less narrowed my choices down to Yamana Gold, Hurco, and Middleby.
I'm inclined to go with Middleby, the boring oven manufacturer (among other things). The market didn't like the company's most recent results, but it certainly doesn't justify the stock getting hit down to a new 52 week low below $45. The company is a leader in commercial ovens and owns the top brands in the market, international expansion is picking up, and the company has a dedicated management team. New, efficient ovens are picking up steam amid higher energy costs, and barring a severe slowdown in the near future (which I don't expect to happen), the company's business should not halt too much. Margins are holding relatively steady considering today's environment. One thing I don't like is the company's high debt level due to using debt to finance acquisitions, but the company has managed debt well over the past several years and cash flow production has been rising each year for the past four years (and this year is off to a good start when compared to last year). So, considering how much the stock has been hit even though nothing has changed with the core business, I see Middleby as my likely next purchase within the next couple weeks.
Hurco is very tempting and the stock is in a similar situation to Middleby, but over the past two quarters the company has experienced negative cash flow production which I haven't gotten a good explanation for. The balance sheet is very clean, which certainly is a plus in a hostile economic environment. The company is a good hedge to a lower dollar and has great opportunity in Asia (although, come to think of it, Middleby also has a lot of opportunity there). So Hurco certainly has a lot of pluses and if I did have more cash I probably would open a position at these prices. But, cash is limited, and for now I need to pick one company.
Yamana Gold is one of the better gold businesses out there today and I'm glad I already have a bit invested in them. I see gold as a very good hedge in inflationary times and poor economic times in general, which is one of the main reasons I've considered adding to my position. Yamana is a top notch gold producer and is a very well managed company, all pluses. But, gold has jumped a large amount over the past few days, so taking that into account and also the fact that I don't feel I know quite enough about the business just yet, I'm passing on Yamana for now. If the share price took a dive to the $14 area, though, it'd be very tempting to add to my position.
Anyway, there are a ton of other bargains out there, such as Tata Motors, Hansen, Village Super Market, so it really is hard to choose which to add to. My portfolio has been hit very hard, so at this point I'll probably patiently average down with my current holdings and keep my eye on a few other businesses that I don't currently own. Along with Hurco, the railroad industry is one I'm very attracted to and would definitely consider investing if they take a hit.
Tags:
economy, hurco, middleby, opportunity, pencils fund, stocks, yamana gold
Posted at: 12:56 PM | Add Comment
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