The bulls were able to make a little progress on Tuesday. They just couldn’t hold into it, slipping back into the red before the closing bell rang. It wasn’t oil leading the selloff today, however. Crude oil slumped to yet another multi-year low, but for the first time in several days fought its way back to a small gain. Better still, there are whispers that oil may have capitulated, today, finally hitting bottom.
Though the jury’s still out on the future of crude, there was no ambiguity about the weakness from Harley-Davidson Inc. (HOG), Navistar International Corp. (NAV) and Dr.Reddy’s Laboratories Ltd (RDY) today. These names were the worst of the worst, for a variety of reasons.
Harley-Davidson (HOG)
Don’t look for a specific reason Harley-Davidson sputtered on Tuesday — you won’t find one. There’s not been any major news from, or even about, the company since last week.
We can’t even blame the pullback on profit-taking, since HOG stock has been slightly bearish for the past several days, going from bad to worse thanks to Tuesday’s near-6% meltdown. Nor can valuation be blamed, as HOG stock has a trailing P/E of 16.3.
So what’s the non-specific reason HOG stock tanked today? Most plausibly, fears of a brewing global recession … the one also being suggested by the recent implosion of crude oil prices. If consumers are going to be forced to clamp down on spending, motorcycles and other high-end toys will be the first industries to suffer.
All that said, it may be way too premature to punish Harley-Davidson for something that might happen in the future.
Navistar International (NAV)
The good news is, truck-maker Navistar International shrunk its Q4 loss by more than half, according to this morning’s numbers. The bad news is, even with that progress, Navistar still fell short of expectations.
In its fiscal fourth quarter, the company lost 88 cents per share of NAV stock versus a loss of $1.91 per share in the same quarter a year earlier. Sales grew 9%, to $3 billion. Problem: The pros were expecting a profit of 15 cents per share of NAV stock on $3.02 billion in revenue. In their disappointment, investors sent shares down a whopping 16%.
Domestic truck sales showed promise, with that segment seeing its year-ago loss of $355 million shrink to only a loss of $55 million in the previous quarter. Navistar International lost traction in foreign markets, however, with the loss from that segment expanding to $33 million, from a loss of only $6 million in the fourth quarter a year earlier.
Dr.Reddy’s Laboratories Ltd (RDY)
The news Dr.Reddy’s Laboratories unveiled today should have been good for RDY stock … or at least not bad for it. The company announced it was launching 450 mg Valganciclovir (generic VALCYTE) tablets in the United States. VALCYTE generates more than $400 million in sales in the U.S, every year, and Valganciclovir will allow Dr.Reddy’s Laboratories to participate in that pharma venue.
So why did RDY stock stumble more than 17% on Tuesday? Because investors were far more worried about global currency volatility.
Dr.Reddy’s is an Indian company that does a tremendous amount of business in foreign markets. With the Russian ruble plunging again today despite the country’s central bank’s efforts to spark a rebound (via a major interest rate hike), investors are understandably concerned that no currency exchange rates are stable or predictable. That poses a major risk to a multinational name like Dr.Reddy’s.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
