Hudson (HDSN) revisited

Back in September, Alex posted his overview of Hudson Technologies, a refrigerant reclaimer/supplier. I found the company interesting (it’s a microcap) but I didn’t rush to buy, preferring to mull things over a bit. I eventually established a small position. I added to my position today at $6.00/share.

It’d be a good idea to go back to Alex’s post and go through the thread:

http://discussion.fool.com/hdsn-an-evaluation-32827635.aspx?sort…

The overall financials look decent, and there is most definitely an upsurge coming in the refrigerant market. I felt the company was reasonably valued, but had no particular reason to buy more.

Two developments changed my thinking: Insider buying and the change in corporate income tax.

A number of insiders just purchased shares in the open market. These were decent-sized purchases. Good sign.

But the kicker was my consideration of the effects of the corporate tax rate reduction. HDSN is going to greatly benefit when the corporate tax rate gets reduced. HDSN is a small US company that essentially gets hit with top corporate rates. HDSN is taxed at 35%. As a consequence, HDSN pays over $6 million in taxes on a pre-tax income of $18 million. HDSN will benefit greatly as this will translate into significant margin improvement. HDSN is already fairly valued. Earnings estimates will be revised in fairly short order. I thought this was a good time to buy.

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HDSN is taxed at 35% no doubt the pros have already computer screened companies that will benefit the most so it is probably priced in for lots of them. Institutions must diversify, now they can cherry pick beneficiaries and diversify into them.

I have no idea whether I will benefit directly from the new tax law. But I am all for it because if corporations and individuals keep more money that will stimulate the economy, which will help business , which( all other factors being equal) will help stock prices, which will help me to a more comfortable retirement.

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