Why the Seven Group Holdings’ Share Price Fell Today

Seven Group Holdings

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.


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Greg Canavan
Greg Canavan is the Managing Editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails. For more on Greg go here.

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