Hello! I am no familiar with this company, just started following it yesterday. It looks too cheap, can you please explain where is the catch? Is it energy investments woes? Or may be patent expiration issues? Thanks a lot!
1) Nextec threw 10 lawsuits at HWG. Although 7/10 are thrown out, 3 lawsuits still hang over its head. How much do these 3 patents contribute to the bottom line? Nextec also slammed HWG with 200 mm fine. Although unlikely to recover the full 200 mm, if Nextec does win, the question of bankruptcy becomes a very real one for HWG.
2) Over 70% of the revenue comes from the US military, and it's written on the walls that the US is pulling its troops out of the Middle East. The top line sales will get hit.
3) CEO siphons 1 mm or 996k to be exact from the company each year, through a consulting company called "HIL". Sure, HWG is selling below NCAV now, but after a few years, HIL will suck the cash dry like a vampire. The current assets, cash, will dry up and you'll be left holding the bag, an empty one to be exact.
4) Be happy if you can sell your textile machines back into the secondary market for 50% of purchased value. Personally, I've worked in manufacturing, and the textile and molding machines are priced like "SCRAP METALS" in terms of weight. Commodity prices have skyrocketed these couple of years, so you might fetch a couple of pennies more for the machines.
5) CEO owns over 50% of the company. Forget about outside acquisition, such as the ones that recently took place in PARL or BLD (those 2 made my year end with a bang). This is a one man show. Read somewhere where the CEO had a tender offer for $12 bucks a share and then rescinded his offer. Why buy it for $12 a share when he can siphon the money out through HIL for FREE! HA!
6) Low volume stock. Once you're in, you have to wait for the next sucker to get out. Talk about cheap, plenty of large caps that are cheap, like GS. You can't beat the thieves, so why not join them. GS does what it does best, going out to rob people. And they are the best in the business! (Can't beat them, join them... and I'm probably too dumb to get hired by them anyways... LOL)