Bruce Pile

Hawkins Is a Diamond in the Rough

In addition to their water treatment chemicals, which is a good growth area of the future, Hawkins is something of a stealth agri chemical play, but without the high profile foibles of a Potash or Agrium. These fund darlings have too much of a tendency to follow and amplify all the sharp moves of the market, not because of their fundamentals, but because of their shear popularity. I don't like the popular, high profile names just for that reason. HWKN tends to move more independently from the market.

Hawkins certainly has the growth of a fund darling. Their revenue growth the last 3 years has been jaw dropping. If you look at a bar chart of their eps of the last 10 years, it has the look of an explosive growth stock with the recession of '07/'08 merely holding flat a hyperbolic curve that is now resuming. You are paying a P/S of 0.75 (I like any P/S that starts with "0") and a ttm P/E of just 10 for this level of growth, not what you'd expect to pay. The price/cash flow is 18, more expensive than I like, and there is no insider buying to speak of. But they all have a wart or two.

With a tiny float of 8 million shares, any big fund movement into this stock could turn it into a rocket. If it should become a popular agri chemical play as well as a popular water play, it may attract such money. The agri involvement is just a small part of everything they do, but CEO John Hawkins said in commenting on a stunning fiscal Q1 '09 on 8/7/08 "...we realized higher margins on certain products this past quarter given growing demand and a tight supply environment, which drove up prices primarily in products serving the agricultural sector."