Q: Hi, Hammond Power stock continues to make new highs every day. Scarcity of sellers and low liquidity is evident. An order for sale of 8000 shares at $84.82 was quickly snapped up by hungry buyers, in no time. Besides the low float, what are the fundamentals driving the stock with this incredible strength? How is the valuation today, with the elevated prices? If there was cash to deploy, would 5i consider increasing its position in the Portfolio, at these levels ? Thank You
5i Research Answer:
Yes, we would be willing to increase our position size. Valuation has changed, to 18X earnings, from a historical average well below that. But the company is now worth more than $1B, and that can change valuations as more institutional investors look at the company for the first time. Also, earnings growth and outlook remain impressive. Sector growth and customer demand has been the main driver, and we see this lasting at least for a couple of years. This does not guarantee anything for the company, as it needs to continue to execute, and there is competition. But essentially, it is winning new customers and seeing existing customers order more.