New Capital
Contrarian, deep value, long/short equity, special situations

Emeco Holdings - The Bear Case

I am writing this in response to a recent bullish article (by Alpha Vulture) on Emeco Holdings (OTCPK:EOHDF). Although the article covers liquidation value assessment quite extensively and mentions some of the risks (low equipment utilization, haircuts on book value upon sale and debt burden), I believe some vital bearish arguments are missing.

Cycle is not likely to bottom out yet

Emeco's valuation in the previous article rests on the assumption that 2013 was the bottom of the cycle in the mining industry and things will improve going forward. However, if history can give us any clue, mining industry cycles usually take longer than a year to revert. See the charts below depicting volatility of Caterpillar sales and...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details