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Use the mess in the U.S. to add juice your investment returns



March 08, 2008 – Comments (3) | RELATED TICKERS: HURC

Wow, two blog posts in one day.  I'm on a roll.  That's what happens when you have a sleepy, pregant wife and a three year-old who goes to bed early...Saturday night blogging.  Party time :).  All kidding aside, I love my family.  I think that I just need to go have a beer when I finish this post to make myself feel cooler :).

People have been talking about Hurco here at The Motley Fool for some time now, but I never really looked very closely into it until it became an official recommendation of one of the newsletters.  I really haven't been buying many domestic companies lately, except for ones that are significantly involved in exporting goods.  These companies have benefited from the rapidly falling U.S. dollar and they will continue to benefit if the dollar falls further in the future, which I believe it will.  What sealed the deal for me and convinced me to purchase shares of Hurco in real life (never enough shares of course ;)) is a Smart Money article that appeared in the February 2008 issue.  It was written by Jack Hough.  He is the Smart Money resident stock screener so to speak.  I've always enjoyed his articles.  In this article, he ran a screen for export-heavy companies that have strong sales and earnings growth, high returns on invested capital, reasonable P/E ratios.  It turned up seven companies, Astec Industries (ASTE), General Cable (BGC), ITT (ITT), Lincoln Electric Holdings (LECO), Manitowoc (MTW), Terex (TEX), and ...drum roll please... Hurco Companies (HURC).  

Listen how attractive Hurco sounds in his blurb about it: "Hurco Companies trades at just 13 times earnings, surprising for a company whose earnings are expected to grow at more than double the broad market's rate over the next five years.  It makes machines and software used to cut metal; 73 percent of product sales come from outside North America."

Let me tell you, so far the strategy of purchasing Hurco because such a large percentage of its sales come from outside of the United States has paid off handsomely.  The company knocked the cover off the ball when it reported its first quarter results on February 28th.  Its first quarter earnings increased by an outstanding 44%, its sales increased 29.9%, and it beat analysts estimates by $0.31 per share.  A weak U.S. market was more than made up for by the company's strength in Europe and the weak dollar.

The U.S. may be in bad shape right now, but that doesn't mean that you can't use its demise to your benefit and add juice your investment returns.

A few other random things that popped into my head while writing this.  Smart Money magazine is an amazing bargain.  Sure its articles are hit and miss and I don't always agree with them, but the more one reads the better an investor they become.  You never know where you will get that spark that gives you the idea for your next great investment.  I was able to take advantage of a special that was running on to subscribe to Smart Money for $9.99 per year.  That's practically free!  What a great deal.

Also, I mentioned that I like Jack Hough earlier.  Well, I recently picked up his new book, titled "Your Next Great Stock - How to Screen the Market for Tomorrow's Top Performers."  It's sitting on my bookshelf next to the 1,000 other books on investing that I've bought lately.  I think that it will take me the rest of my life to get through all of them.  I guess that's the advantage of having a Borders Visa card :).  Has anyone read this book?  Is is any good?


3 Comments – Post Your Own

#1) On March 08, 2008 at 9:45 PM, Tastylunch (28.70) wrote:

I like Smart Money too, only problem I see with it is that's printed monthly. Speed of information is much faster than that in the internet age. Acting on a smart money rec always makes me feel like I'm a month behind the curve.

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#2) On March 09, 2008 at 3:56 PM, DemonDoug (31.02) wrote:

Only problem I have personally with HURC is that I don't understand their industry and how they make money.  Reminds me too much of FARO.  It also seems like there is a lot of competition in this industry.  Plus with the slowdown of the US consumer, that means manufacturing in other companies is going to slow.

This is not to say that HURC isn't a great company (by all means that I've read it is a great company), just more that there is a bunch of things with it that I don't get. 

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#3) On March 09, 2008 at 6:25 PM, StockSpreadsheet (65.68) wrote:

I bought Sun Hydraulics with the same thought process, (fairly cheap, (at the time), good exports, benefits from the cheap dollar, etc.).  Sun Hydro has done very well for me, (up about 50% since purchase last year).  A lot of domestic manufacturers are showing up on my radar.  The weak dollar will help them. 

Also, there was the article on the main Motley Fool page about BMW laying off workers in Germany and expanding production at their South Carolina plant to take advantage of the weak dollar.  I think this might happen more, and could be a very good thing for our economy.  I think American needs to become less a consuming nation and more a manufacturing nation.  Only then can we reduce our trade deficit and maybe help pay down all of our other debt through a positive trade balance, instead of the huge gap that we currently run.


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