Tuesday, July 23, 2019

Sandvik Knocked Back As Signs Of Slowdown Accumulate

I suppose it’s still early in the second quarter reporting cycle, but I’m pretty much sold on the idea that the industrial economy is most definitely slowing, though in the interests of transparency, that’s been my expectation for a while, so there’s a risk of seeing what I want to see. Specific to Sandvik (OTCPK:SDVKY), shares have fallen more than 10% since my last update on the company, as those signs of slowdown continue to build and a second half rally seems less likely.

I like Sandvik as a business, but it’s tough to get excited about a company with heavy auto and general industrial exposure at this point in the cycle, particularly when past downcycles at Sandvik have lasted a little more than a year. Perhaps stimulus (the market expects the Fed to cut rates) will lead to a shallower, briefer downturn, but I think there could still be too much optimism for a second half rebound in the market. Sandvik shares are now a bit below my fair value estimate, though, so this is a name to keep a closer eye on if the pullback continues from here.

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Sandvik Knocked Back As Signs Of Slowdown Accumulate

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