Bear Murray's Gary M. Giblen is yet again out in defense of Hartmarx (AMEX:HMX). I highlighted his positive call on HMX on June 13. While the stock did bounce 7-8% over the next couple of days, it got hit badly after the co announced its quarterly results and issued weak guidance.
Giblen notes the July 3 open market purchase of 10,000 shares by Chairman/CEO Homi Patel is meaningful. It is the first material insider purchase since 2004 other than option-related transactions. Insiders have historically demonstrated good timing in buying and selling HMX shares. For example, a 40,000-share buy in 2004 was at the short-term low price of $7.50 per share; the shares were 35% higher five months later.
This reinforces firm's sense that HMX may have bottomed at the $6.00 closing price of June 30, which was one day after the weak earnings/ outlook of June 29 and which may well have been depressed by end-of-quarter portfolio window dressing, as they had anticipated. HMX inched higher on July 3, the first trading day of the new quarter, with Mr. Patel's buy averaging out at a price of $6.01 per share.
Giblen notes that if HMX traded at the median comparable forward PEG of 1.0x rather than the bottom of the group 0.5x, it would translate to a forward P/E of 13x and firm's $11 target price. It has $2 per share in NOLs and a book value of about $10.50 as adjusted for the value of the iconic Hickey Freeman and Hart Schaffner Mart brands, which are not recorded on the balance sheet. Firm also concludes a buyout price would be $14-15 per share and see many logical and well-financed potential acquirers.
Notablecalls: I still think HMX is an interesting situation.
Giblen notes the July 3 open market purchase of 10,000 shares by Chairman/CEO Homi Patel is meaningful. It is the first material insider purchase since 2004 other than option-related transactions. Insiders have historically demonstrated good timing in buying and selling HMX shares. For example, a 40,000-share buy in 2004 was at the short-term low price of $7.50 per share; the shares were 35% higher five months later.
This reinforces firm's sense that HMX may have bottomed at the $6.00 closing price of June 30, which was one day after the weak earnings/ outlook of June 29 and which may well have been depressed by end-of-quarter portfolio window dressing, as they had anticipated. HMX inched higher on July 3, the first trading day of the new quarter, with Mr. Patel's buy averaging out at a price of $6.01 per share.
Giblen notes that if HMX traded at the median comparable forward PEG of 1.0x rather than the bottom of the group 0.5x, it would translate to a forward P/E of 13x and firm's $11 target price. It has $2 per share in NOLs and a book value of about $10.50 as adjusted for the value of the iconic Hickey Freeman and Hart Schaffner Mart brands, which are not recorded on the balance sheet. Firm also concludes a buyout price would be $14-15 per share and see many logical and well-financed potential acquirers.
Notablecalls: I still think HMX is an interesting situation.
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