Wall Street had to deal with another sell-off on Thursday, with the Dow Jones Industrial Average dropping nearly 800 points before recovering much of its losses by the end of the trading session. A high-profile incident involving the arrest of Huawei CFO Wanzhou Meng threatened to derail the recently renewed trade discussions between the U.S. and China, and market participants were also concerned about the continued divergence between the bond market's fears of an economic slowdown and the Federal Reserve's insistence that higher interest rates are needed to cool down future inflation. Though the broader market saw a small overall decline, many stocks had bigger losses. Transocean (RIG +2.72%), Tronox (TROX +2.89%), and Ollie's Bargain Outlet Holdings (OLLI 5.91%) were among the worst performers on the day. Here's why they did so poorly.
Transocean finishes an acquisition
Transocean shares fell 6%, responding negatively to oil price weakness that sent crude down more than $1 per barrel to around the $51.50 mark. Transocean relies on healthy levels of offshore drilling activity, and lower crude prices make it less economically feasible to deal with the higher costs of producing oil and natural gas in an ocean environment. Transocean did announce during the U.S. market's day of mourning Wednesday that it had completed its acquisition of industry peer Ocean Rig UDW, adding more than a dozen vessels to its fleet of drillships and semisubmersibles. Even so, the company will need better conditions in the oil market before its stock can recover substantially.
Image source: Transocean.
Tronox keeps trying to make a merger happen
Tronox saw its stock plunge 23% after the maker of titanium dioxide pigment proposed significant concessions in order to try to get approval to merge with fellow TiO2 manufacturer Cristal, which is based in Saudi Arabia. In particular, Tronox suggested to the administrative law judge overseeing the case at Federal Trade Commission headquarters in Washington that it'd be willing to sell off the Ashtabula plant complex in Ohio to a unit of chemical giant INEOS for $700 million. The move is an effort to get the FTC to approve the deal, but Tronox also said that FTC staff won't recommend approval despite the proposed Ashtabula sale. That has investors nervous about the entire titanium dioxide space, even though fundamental demand for the paint pigment is still reasonably strong.
Investors think Ollie's is no bargain
Finally, Ollie's Bargain Outlet Holdings stock suffered a 17% loss. The deep-discount retailer's fiscal third-quarter earnings report included fairly solid results, including a 19% jump in revenue on comparable-store sales growth of 4.6% and a gain of nearly half in adjusted net income from year-earlier levels. Ollie's also said that it opened its 300th store during the quarter, and CEO Mark Butler has high expectations that the coming Ollie's Army Night on Dec. 9 will be the highlight of the holiday season for the company. Yet some investors fear that even with its strong growth, Ollie's forward earnings multiple of roughly 35 makes the stock a bit rich for bargain-hunting shareholders.
