Savvy Trades and Investments

[littlefish]

HRTH Harte Hanks is one I really like that could benefit as all these arb companies try to develop branding power in competing for their share space in consumer markets and we see a recovery in other spaces. HRTH helps in branding and targeting audiences for company products. They’re also a potential recovery play with customers in travel and retail (both areas got clocked from pandemic). Market cap around $20 mill. A potential downside risk is the defined benefit pension plan that was frozen in the late 90s but the plan should have performed fairly well in 2020.

Their CEO used to be CEO of a billion+ dollar company in related field for over a decade and is still in his early 50s. He has been assembling a competent team over the last year.

Last Q if you take out all the restructuring charges (which will continue a little longer as they bring online a 300k sq ft state of the art fulfillment center around Kansas City) they had adjusted EBITDA around $3.2 mill vs that roughly 20 mill market cap and had adjusted op income over $2 mill (annualizing the quarter gets a PE a little over 2 although it is probably early to annualized the latest Q where there may be some lumpiness).

This one will probably take a few quarters to get going if it works out but the potential earnings power is huge given their revenue base to market cap (trading around 0.1x sales). Also, they’re turning toward a pretty light operating structure (e.g. moving to cloud based) with light CapEx so earnings will turn to cash or be used in constructive areas to further growth in my opinion.

They’ve worked with lots of different companies. Ford, BMW, Toyota, Lexus, B of A, Blackrock, HSBC, Sony, Samsung, Royal Caribbean, Pfizer, Lily, GSK, Bed Bath Beyond, Petsmart, Bass pro shops, etc...

They should be a decent cash generator in a few quarters and are forecasting free cash flow positive once all the logistical moves settle down starting in Q3 2021. This thing trades very thin and is very small but they have good pieces starting to show to have a major turnaround after years of being a mess.

Their customers in auto, airlines, retail, healthcare, financial- all sectors with social arb implications and/or recovery- should look to do well in target marketing their brands and messaging. Again, all IMO. Always risks with everything but at least it looks potentially cheap in this market given the potential turnaround and potential growth opportunities with recovery and social arb industries supporting the idea of more spend on target branding and building of company products. Good luck all, busy IRL right now.

Website- https://www.hartehanks.com/