TSR Inc. (TSRI) provides IT personnel to its clients for contract work. As companies have aggressively cut costs, TSR has seen reductions from its clients in both hours of work requested as well as price, as the supply of labour in many areas outstrips the demand for labour. But the nature of this industry is such that this company can still make money, even in hard times!
Most businesses see losses when revenues drop by over 10%, as a result of cost structures which contain a large element of fixed costs (e.g. Consider an airline, which has almost the same costs when a plane is full as when it is almost empty.) But TSR does not have to employ workers that are not needed at client locations (i.e. contract workers that are not earning revenue are not causing losses). Therefore, when revenues fall, so do costs.
In a particular quarter, however, losses can of course occur. The company does have some fixed costs (it's impossible to have none), and so if revenue comes in lower than expected, there could be some red ink. But over longer periods, this company is incredibly flexible in how it can manage its costs versus its revenues, which is very important when the outlook is unclear. No management guesses are required in the form of capital outlays (e.g. no plants need to built) which could turn out to be underutilized; the company can simply cut costs or ramp up as is deemed necessary.
When this flexible cost structure is combined with the company's assets, TSR becomes a strong candidate for a value investment. The company trades for just $8 million, but has net current assets of $12 million. Often, companies trading at such discounts to their assets are losing money hand over fist. Due to the weak labour situation, the market appears to be treating this company as if it will lose money. But TSRI's cost structure makes losing money a difficult thing to do, protecting the investor's downside at this price.
Disclosure: Author has a long position in shares of TSRI