Why the Seven Group Holdings’ Share Price Fell Today

What Happened to Seven Group holdings’ Share Price?

Shares in industrial conglomerate Seven West Holdings [ASX:SVW] fell 4.6% today to $5.40, versus a fall of just 0.25% for the broader market. The stock price has been under pressure for nearly a year. It hit a high of almost $9.50 per share back in March 2014.

Why Did This Happen to SVW Shares?

While there was no specific announcement from the company, other events drove the share price down. SVW owns Westrac, which holds the licence to sell Caterpillar equipment in NSW, WA and north eastern China. In the US overnight, Caterpillar announced a profit downgrade due to weak commodity prices. Its share price plunged 8%.

This suggests that SVW’s caterpillar sales will also be weak this year, which will impact profits in 2015.

What Now for Seven Group Holdings?

Seven Group Holdings is a diversified company, owning businesses in the industrial and media sectors as well as the Westrac licence. While it is diversified, it is heavily exposed to the commodity cycle through its Westrac and industrial businesses.

2015 should be a tough year for the company, and with China entering a long period of low growth which doesn’t rely as much on commodities, the next few years are also likely to be lean for the company.

While the share of the Seven Media interests provide diversification, with the Aussie economy weak the story isn’t much better for this sector.

The share price is close to an all-time low, but the trend is firmly down, which suggests a sustainable recovery is still some way off.

Regards,

Greg Canavan+
for Markets and Money

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Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing. He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’. Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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