Metal Processing and Fabrication
The company changed its name and symbol recently and some sites don’t recognize the old symbol or don’t have any old news linked to the new symbol. So if anyone knows more news detail than I could find, please feel free to comment.
1. HNH (formerly WXCO) is a supplier of metals and tubing to the auto and home-building industry, among others. Needless to say, those were two of the hardest hit groups in the “great recession” and the stock price reflected it. The stock declined from about $120 in 2005 to a low of $1.10 by the second half of 2009. Technical neglect has been consistent pattern on each of these stocks making 500% moves.
2. The stock had no analyst coverage or earnings estimates available (neglect).
3. The Group RS rating was 93. Other stocks in the group that did well included NNBR, LDSH, and TKR.
4. The company had 300% or so eps growth for 2 straight quarters (6/2010, 9/2010) after stock had already bottomed earlier in the year. Sales growth during the move was between 14% and 32%.
5. IBD ratings are 97 Comp, 80 EPS, and 99 RS.
6. Fund ownership was up 24% from March to June (note the initial breakout was in April 2010). The stock only had 21 funds owning it. Fund ownership slipped back near March 2010 levels by December. 53% of the company is owned by management.
7. The float was 5.7 million. The company had a 1:10 reverse split in late 2008.
8. Fundamentals were not great – company was losing money most quarters and had no return on equity. But the last two quarters they were profitable and had good sales growth. PE was about 34, the high end of its 5 year range.
Weekly chart:
The Breakouts:
1. At the end of its descent from $120, the stock formed a double bottom in 2009 and then built an 8-month base along the pivot point before breaking out in April 2010. After a high-volume successful test of its 50-day average, the stock bounced and broke out of the 8-month base in early April (1st-2nd). The stock was up 9% on the day of the breakout and rallied for 11 days for a total move of 48% from the $2.61 breakout point. The Company updated its Q1 earnings guidance about a week after the breakout on April 12th, and the stock continued its rally after earnings.
2. After the April 2010 move, the stock formed a 17-week base and broke out in mid-August 2010. The volume dropped off drastically during the second half of the base before the breakout. The Company announced its June 2010 eps results which showed 296% and 14% growth in eps and sales, respectively. The stock was up 19% on the breakout day, and it continued its rally for another 7 days. The move carried the stock 94% past the $5 breakout price. After this strong move the stock consolidated for about 6-7 weeks.
3. After a 6-7 week base, the stock broke out on October 1st on high volume and $$ volume. The company released its earnings results, showing 325% eps and 22% sales growth. The stock was up 18% on the breakout day and ended up making a move of 21% from the $9.68 breakout price in 8-9 days. The stock then attempted another breakout in November 2010 that failed, and the stock got into a trading range that it is still in today.
So why did HNH go up 500% in a year?
Neglect + Turnaround earnings growth (300%+) + news catalyst + sector RS. This stock had turnaround earnings growth in triple digits that caused a large percentage gain from a low price area. Since there were two earnings related breakouts, it does appear that news catalyst was important to get the stock to get back into its uptrend. Most of these stocks that are up 500% started from $1 or less in 2009 and formed long bottoms and bases in preparing for its recovery move. HNH was no different.
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