Navistar Heads in the Right Direction

Patience is normally a virtue, but when it comes to investing in deep cyclical stocks, it's an absolute necessity. Because of the boom-and-bust nature of their end markets, bottom-line results can swing from big profits to steep losses.

Consider Navistar(NAV Quote), for instance, which I covered in June. The stock of this maker of commercial trucks, school buses and midrange diesel engines gained significant ground last year. Shares more than doubled from their low of late 2002, reaching a high of nearly $52 in early 2004. But since then, Navistar has lost more than 30% of its value. Seven percent of that decline occurred just last Thursday, when the company released fiscal third-quarter results and held a conference call.

As earnings conference calls go, Navistar's certainly could have been better. During the call, it became apparent that not only was the quality of third-quarter earnings low, the company's new full-year guidance was higher only because of a number of nonoperating items.

Hope Shines

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