Hawkins, Inc. (HWKN): A Bull Case Theory

We came across a bullish thesis on Hawkins, Inc. (HWKN) on wallstreetbets Subreddit Page by RoloBoat. In this article, we will summarize the bulls’ thesis on HWKN. Hawkins, Inc. (HWKN)’s share was trading at $121.78 as of April 30^th. HWKN’s trailing and forward P/E were 31.07 and 27.40 respectively according to Yahoo Finance.

Hawkins, Inc. (HWKN) is a regional distributor of bulk commodity chemicals and value-added derivatives for industrial and water treatment applications. The company operates through three main segments: industrial, water treatment, and health & nutrition. Its industrial segment serves a diverse array of industries including agriculture, chemical processing, food, and pharmaceuticals, primarily focusing on acids, alkalis, and food-grade salts. HWKN manufactures and distributes both commodity chemicals and specialty products, blending or repackaging base chemicals like sodium hypochlorite and liquid phosphates to meet specific customer needs. The water treatment segment specializes in chemicals and services for municipal, industrial, and agricultural water, focusing on smaller customers with a delivery route business model. HWKN has grown this segment through acquisitions, spending around $150 million since 2021 and adding approximately $15 million to $20 million in EBITDA. The health & nutrition segment provides ingredients and formulation solutions for wellness products, including minerals and natural B vitamins.

HWKN’s business is largely driven by the purchase of bulk chemicals, which it then repackages or blends to sell in smaller quantities, generating profit margins per unit. The company has historically benefitted from periods of volatility in commodity prices, particularly in the post-COVID environment, where supply disruptions and rising costs created an opportunity for distributors to significantly increase prices. The shortage of chemicals like chlorine and caustic soda, exacerbated by the pandemic and a curtailment in chlor-alkali production capacity, led to a surge in prices and profit margins, even as volumes sold declined. During this time, HWKN capitalized on its regional presence and focus on smaller clients, facing less competition from larger distributors who were more focused on bigger customers.

The market dynamics shifted in 2024 with the stabilization of commodity prices and a softening in demand. However, the recent implementation of Trump’s tariffs on chemicals has reintroduced supply chain disruptions, potentially leading to shortages once again. This presents a favorable environment for distributors like HWKN, allowing them to increase prices well above cost increases and boost revenues and margins. The company stands to benefit from this new wave of supply constraints, positioning itself for another period of elevated profitability. As a result, HWKN is poised to continue its strong performance, driven by the ongoing volatility in commodity prices and its strategic focus on inorganic chemicals, where it has become a leading player.

Hawkins, Inc. (HWKN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held HWKN at the end of the fourth quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of HWKN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HWKN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.