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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