Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Westport Innovations (WPRT 1.06%) stock was down 9% today, adding more injury to long-term shareholders. The stock is down more than 80% this year:
WTI Crude Oil Spot Price data by YCharts
So what: There was no material news about Westport today, but almost every stock tied to oil prices got hammered. Brent crude prices fell 4% today, and West Texas Intermediate -- a U.S. oil benchmark -- fell to $63.05, a five-year low.
What does this have to do with Westport? Westport's business -- designing natural gas engine technology -- is dependent on having natural gas as a cheaper fuel than oil-refined fuels such as gasoline and diesel, and gasoline prices have fallen a long way this year.
Natural gas is still about 70 cents per gallon equivalent cheaper than gasoline, based on national averages, but the bigger question for Westport is probably economic, as the majority of its business comes from Europe and Asia. Europe's economy is a mess, and Asian growth is slowing. Lastly, there is probably still some tax-loss selling going on, further pushing the stock lower.
Now what: Westport's stock has been destroyed this year, but the company hasn't exactly met expectations. Frankly, there's a lot of risk to this company, as it is still burning more cash than it generates, and that's likely to continue for at least another year or more. So while the stock price drop is relatively immaterial to the business, there's still a chance it falls even further.
With that said, the current management team has made some solid efforts to improve the company's position, reduce costs, and invest in profitable growth. With all that risk, there still remains huge upside. Just keep the risk in mind, and don't invest more than you're willing to lose.
