Six months ago, we responded to a “buy” recommendation on Hammond Power Solutions (HPS.A). At that time, we disputed the recommendation and suggested it had come far too late, as the company no longer appeared to be the steal it was in 2004 when it had no such recommendation.

Since July, however, the company’s stock price has fallen 50%, and HPS now looks like a company trading with a large margin of safety. HPS makes custom electrical magnetics and dry type transformers for use in several industries including wind power, oil and gas, mining, waste, and water management, without being dependent on any single market. The company has been growing quickly, having doubled sales in the last four years, and now has a P/E under 5.

Since it is a relatively small company (with a market cap around $70 million), small investors have an advantage since it falls outside the range of the largest funds. For small investors who are paying attention, this company looks like it has a bright future. Even while the economy slows, this company has been growing its backlog (even organically – i.e. without acquisition). While it most certainly cannot completely escape the global spending slowdown, its backlog will certainly help smooth out this effect, and its low debt levels should keep it safe until government and central bank liquidity injections are felt throughout the economy.

Disclosure: Author owns a long position in HPS.AO0vV6kI59AM