Welcome to Thursday, Foolish readers. While the S&P/ASX 200 lost 1.3% to 5014 points, a number of companies were hit substantially harder.
Resource stocks in particular are on the nose, although one defence contractor sank on a profit downgrade, and a health insurer lost some ground as investors worried about possible increased competition.
Here's what you need to know:
Austal Limited's (ASX: ASB) share price dropped 27.1% to $1.66 on a shock market update, with the company announcing that previously expected Earnings Before Interest and Tax (EBIT) margin improvements on its US Littoral Combat Ship (LCS) program would not materialise.
Today's announcement indicated that the current year's earnings from US shipyards are expected to be lower than in the 2015 financial year. EBIT margins would be between 4.5% and 6.5%, compared to 5.5% in 2015. I believe the sell-off is vastly overdone, but do not think the stock is yet in buying territory as it is a low-margin business with lumpy revenues and uncertain demand.
Yellow Brick Road Holdings Ltd (ASX: YBR) shares lost 10.5% to $0.255 on no news, although with property prices and auction clearance rates declining in Sydney and Melbourne, shareholders are likely becoming nervous about Yellow Brick Road's mortgage portfolio and future income.
At today's prices I believe that Yellow Brick Road is an attractive investment option as its one-stop-shop for everything finance-related is likely to resonate with consumers in future years. While home loans are a significant source of income, the company also offers a host of wealth management and financial advice services that will only grow in demand in the future.
WHITEHAVEN COAL LIMITED (ASX:WHC) shares plunged 9% to $0.747 – down 89% in past five years – as investors worry just how far the fallout from Anglo-American is likely to spread. The massive US-based coal miner is reportedly reducing its asset base and sacking more than 85,000 workers, or 3/4s of its workforce.
Weak coal prices look likely to stick around for the time being, and it's no surprise investors jumped ship on Whitehaven. Despite the falls, I do not believe it to be a buying opportunity.
NIB Holdings Ltd (ASX: NHF) shares slipped 5.3% to $3.58 as Suncorp Group Ltd (ASX: SUN) is reportedly contemplating an entrance into the health insurance market. NIB already competes with Medibank Private Ltd (ASX: MPL) and the privately-owned business Bupa, and another competitor can only lead to additional price pressures for NIB.
With NIB looking like the most pricey of existing health insurers, I suspect there could be a little further downside to come in the near term as investors weigh up the competition.
