Nu Horizon Electronics (NUHC) – A NCAV stock
Posted on | December 19, 2009 | No Comments
It takes almost as much research to discover why you don’t want to invest in a company as why you do. But going through the process is important and we make different decisions for different reasons. Nu Horizons came to my attention in the NCAV Newsletter at Gurufocus that I have posted about before. When they recommended the stock it was trading around $3.85 and they had NUHC’s NCAV value as $6.81. In their words, “a 71% upside.” Very interesting. I began to investigate further.
Nu Horizons”is a leading global distributor of advanced technology semiconductor, display, illumination, power and system solutions to a wide variety of commercial original equipment manufacturers (OEMs) and electronic manufacturing services providers (EMS). With sales facilities in 54 locations across North America, Europe and Asia and regional logistics centers throughout the globe.“
But unlike SODI from earlier in the week, Nu Horizons has some big buts about its NCAV status. Technology stocks, particular semiconductor companies can have inventory issues. If you have too great an inventory, you could be stuck with am obselete product that no one wants at any price. Too little inventories and you have pissed off customers. NUHC definitely doesn’t suffer from the latter. $191 million of its $221 million are in inventory and account receivables. Although inventories in TTM have declined their account receivables have decline only slightly. Moreover, NUHC was unprofitable in fiscal 2009 and only eeked out a small profit in the latest Quarter. For the optimistic that is a sign of hope.
Unfortunately, for me their stock price has more than quadrupled from its 52 week low to $4.22 closing yesterday. And when I discount inventories and Accounts receivable, not even at liquidation value, I get a stock that is trading above it’s Net Net value and with no margin of safety. This of course does not mean NUHC is a bad company or that they are not worth investing in. That is each investors choice. But I don’t understand its business model or the viability of its products in the long term or how quickly they will become obsolete. Thus, I won’t invest in NUHC.
Related Posts:
Comments
Leave a Reply
Subscribe to Chroma Investing
