According to Yahoo! Finance:
"Hirsch International Corp. provides electronic computer-controlled embroidery machinery, and related products and services in the United States. The company offers single- and multi head embroidery machines; proprietary application software; embroidery parts, supplies, and accessories; and embroidery products. Its customers include contract embroiderers, manufacturers of apparel and fashion accessories, retail stores, and embroidery entrepreneurs. The company was founded in 1970 and is headquartered in Hauppauge, New York."
The company has been turning itself around for the last seven years. The company is now celebrating it's first year of profitability within that time. Even though Yahoo! Finance shows a Debt/Equity ratio of a bit over 0, the CFO confirmed with me that they now have 0 debt. Looking at other public sources I realized Yahoo! had the wrong information.
I don't usually invest in "turnaround" situations since I am not good at that. I feel even if the turnaround isn't successful I probably wouldn't lose much money. Hirsch International is actually a speacial situation because this company is a net-net. A net-net is described as a company selling below Net Current Asset Value (NCAV). NCAV is Current Assets minus Total Liabilities minus preferred stock. The company actually cash, around 13 million, while market cap sits at roughly 11 million. With no debt and the company making money this means this company liquidates at atleas 13 million or an 18% premium.
Of course there are some risks.
1. How long will it take for the share price to rise?
- If the stock price stays stagnant for the next ten years, you will lose money from inflation.
2. How will management use their cash?
- If management makes another horrible investment with there cash they may decrease shareholder value.
As a disclosure I do own shares in Hirsch International (HRSH)