Arohan

Friedman Industries: Strong in a Weak Market

CarthageCapital, you are correct about the temporary loss of USS. However, I am looking at FRD from the perspective of its current balance sheet to see if it has enough juice to last through the weak market conditions, and I think it does. If and when the economy improves and the steel demand comes back, the company is well positioned to start growing. The current forecasts say that the steel demand will be up in 2010.

If the economic conditions worsen rapidly to the extent that the company needs to be liquidated, there is enough tangible value on the BS that I am confident that the shareholder at current prices will be able to recover a good chunk of his investment.

The question is whether the company will muddle through and leak some of the value in the process. Maybe. I would invest if I trust the management to be competent. Otherwise, just give it a pass.