Novice Investing - Navigating Rough Sea

Date: Sunday 20th 2008f July 2008 12:43:09 PM

Navigating Rough Sea - 05/09/2006

By: Novice Investing Staff

One of our portfolio stock pick, Navistar International Corp. (NAV), has been battered in recent years. We picked them up late last year in the expectation that earning would continue to be strong in 2007 despite the seasonally strong 2006 due to new regulations concerning the bus and truck industry. In our earning estimate, while we expect NAV to earn 'only' $ 2.87 per share, other analysts at Yahoo! Finance was expecting a hefty $ 5.50 per share.

Whatever estimate you use, it doesn't matter. The problem at Navistar was not earning problems. Even earning $ 2.87 per share will give a decent return for Navistar only if its other problems disappear. That is, Navistar is having difficulty to file its 2005 financial report on time. Businessweek reported that the New York Stock Exchange will delist Navistar on Dec 21st, which is two days from now.

Now, while we are enthusiastic about Navistar's earning potential, this delisting issue is a major issue that we did not consider well. When a stock delist, many potential eerie things will happen, including the inability to buy or sell your stocks. Meanwhile, Navistar stock had risen 50% since July on the expectation that it would file its 2005 financial report on time. This is not the case as the company reported the delay of 2005 filing. The original plan was for Navistar to complete its 2006 report by mid January 2007. Now as we move into December 2006, Navistar had not file its 2005 report, which indicate further delay for 2006 filing as well. This does not bode well overall for Navistar's investors.

In our ten reasons to sell written back on September 2005, reason # 2 for selling is when the book is unclean. While Navistar had indicated the range of its expected earning per share for 2006 and beyond, without a clean book, it is hard to trust Navistar's management at this point. Further, as prices has risen in the expectation of 2005 filing (which is yet to be realized), we think that it is time to sell Navistar. Therefore, we are selling NAV now at current price of $ 31.40.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Navistar International Corp. (NAV) or any other securities.

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