High-Priced Industrials Fall as Expectations Wane

Industrials continued their drift downward on Tuesday, after falling Monday because of bad news from a survey of manufacturers by the Federal Reserve Bank of New York. Broad market indexes ended mixed, with the Dow Jones up and the S&P 500 down, both by around 1%, but most manufacturers fell. Leading the way down were growth stocks trading at high valuation multiples, reflecting more modest expectations of future growth.

Two of the day's worst performers were Stratasys (Nasdaq: SSYS  ) and 3D Systems (NYSE: DDD  ) , the two dominant companies in the additive manufacturing space. Also known as 3-D printing, additive manufacturing creates physical objects on-demand by laying down successive sheets of a given material. Stratasys and 3D Systems make and service the machines themselves, as well as well material for printing -- not unlike selling printers and ink. The two companies have both generated staggering returns for investors over the past few years and are priced for explosive growth. Confidence appeared to ebb somewhat today, however, with 3D Systems down 3.8% and Stratasys down a whopping 8.2%.

Tesla Motors (Nasdaq: TSLA  ) also suffered, with the luxury electric-car designer down 3.7%. The company is not yet profitable, but it has big plans to ramp up production and sell many thousands more of its high-end, all-electric vehicles. Yesterday, news that production was increasing faster than expected and an analyst upgrade sent shares soaring by more than 7%, so today's declines may be nothing more than a case of having investors cash out and walk away.

More traditional automakers, however, bucked the downward sentiment and traded up for the day. Ford (NYSE: F  ) was up 0.3% -- modest but market-beating. CEO Alan Mullaly, who distinguished himself by leading Ford through the recent recession without accepting government bailout money, addressed concerns over his future at the company today, saying: "My plan is to continue to serve as the CEO of Ford.. … If I had any plans to do anything differently, I'd share it with everybody." The company also announced an agreement with the Canadian Auto Workers, a union representing employees at its Canadian plants, to avoid a strike and settle a compensation deal late Monday night.

General Motors (NYSE: GM  ) was up 2.7%, after that company announced that it had extended its own negotiations with the Canadian Auto Workers, who were also threatening a strike at GM's Canadian plants. GM has been very effective at keeping labor costs competitive since its 2009 bailout by the U.S. government, and today's price movement may reflect investor confidence that GM will strike a better deal than Ford.

The news comes after reports Monday that top GM executives had proposed to the U.S. Treasury that the government sell its 27% ownership stake. Under the plan, GM would buy 40% of the Treasury's shares, with the remainder sold on the open market. At current prices, however, such a move would represent a $15 billion loss to the government and to taxpayers, something the Obama administration is unlikely to accept in the midst of a heated election. After the election, however, the president -- whether Obama or Romney -- could presumably decide to sell at any time.

Political issues can weigh heavily on investment decisions, but luckily for individual investors, The Motley Fool has put together a free report on how to profit no matter who wins the election. It's important to have an investing strategy in place well before the election, and this report is available for only a short time, so download your copy today.

Daniel Ferry owns shares of General Motors, 3D Systems, and Stratasys. The Motley Fool owns shares of Tesla Motors and Ford. Motley Fool newsletter services have recommended buying shares of Tesla Motors, Ford, 3D Systems, General Motors, and Stratasys and creating a synthetic long position in Ford. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2022015, ~/Articles/ArticleHandler.aspx, 7/25/2014 9:07:21 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement