The Bottom Is In For Hi-Crush's Stock

Jun. 11, 2019 7:22 PM ETHi-Crush Inc. (HCRSQ)125 Comments
Trent Welsh profile picture
Trent Welsh
6.54K Followers

Summary

  • Insider buying and a new buyback authorization could be a clear signal that Hi-Crush's bottom is in and better times are ahead.
  • Hi-Crush has the liquidity to outlast the downturn as the industry consolidates and restructures.
  • C-Corp conversion will open new doors as Permian bottlenecks abate and sand pricing bottoms out.

Hi-Crush Inc. (HCR) continues its aggressive strategy by combining recent insider purchases in front of a much-needed brand new share buyback program. Hi-Crush has the finances to outlast the current market downturn as takeaway capacity is expected to ease in the back half of 2019. The company's successful C-Corp conversion begins a new chapter for the company as it could refinance its high rate debt down to a lower rate during the next upturn in the industry.

Hi-Crush management just launched a new $25M share buyback program which should bring some much-needed relief to highly undervalued shares of this Permian frac sand player. In an industry known for wild swings in volatility, buying shares in overdone downturns make much more sense than instituting a dividend would have. Hi-Crush now trades at a paltry 2.38 trailing P/E with a sub $200M market cap as the sand industry, along with most of the oil industry, has had a very hard year so far.

ChartData by YCharts

However, better times are being signaled not only by the newly announced share buyback program but also by management front-running the announcement with some key insider buying. The only open market insider trades so far in 2019 for Hi-Crush have just recently happened on June 7, 2019, with 100,000 shares bought by Chairman and CEO Robert E. Rasmus and 25,000 shares bought by the company's CFO Laura C. Fulton. These are key signals because management has the best visibility on if and when the downturn in the market will be happening along with their confidence in the business as a whole going forward.

Cash is always a concern for those in the frac sand industry as it continues to be hit with volatile swings in earnings with repeating boom and bust cycles. This has led to consolidation

This article was written by

Trent Welsh profile picture
6.54K Followers
B.S. Psychology University of Missouri-Columbia MBA University of Missouri-Columbia Full time investor looking to capitalize on market overreactions and looking for value where others see nothing but wreckage. Long term buys and short term trades to build wealth.Investing Better Than A Money Manager: The Rise Of Retail Investing - By Trent WelshI have an investing book with the title above on Amazon written for beginning retail investors looking to set up a self-directed portfolio with their IRA's, 401k's, or other retirement or trading accounts. It details how to pick and choose stocks amidst the different sectors and how to figure out how much in each sector an investor should have to help achieve diversification.Please take a look at it and let me know your thoughts. Thanks and Best of luck to all :).

Disclosure: I am/we are long HCR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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