Profits on the (Nu) Horizons
Saj Karsan submits:
Nu Horizons (NUHC) is a distributor of hi-tech electronic components. The stock dropped 25% in one day last week when a key supplier, Xilinx (XLNX), cut Nu Horizons as a distributor in order to streamline Xilinx’s distribution network. Xilinx’s products accounted for over 30% of Nu Horizons’ sales over the last three quarters, so this will have a material impact on Nu Horizons’ operations and will hurt Nu Horizons’ revenue if Xilinx’s products cannot be quickly replaced. However, the current market price of Nu Horizons is such that this seemingly negative announcement may actually be good news for the stock!
Before writing off the preceding statement as preposterous, consider the following: Nu Horizons trades for just over $60 million, while its net current asset value is over $100 million. Most of its current assets (approximately $225 million worth) are in the form of inventory and receivables, and so this negative announcement may actually be a catalyst for cash generation.
Investing, Long Term Investment, stock market | admin March 17, 2010
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