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Takeaway: We are removing OC from our high-conviction stock idea list.

We will take the hit here in OC.  We have been wrong on the name and don’t want to compound that error by holding it in a volatile market that is inhospitable to underperforming smaller capitalization names.  While our long-term research view on OC remains favorable, we expect 3Q 2014 results to be poor and are not sure if the company will lower 2014 guidance.  In a less volatile market, we would assume that the weak 3Q numbers had already been priced in.  In the current volatile market, that could prove a risky assumption.

We are pulling OC right as the company implements price increases in its roofing and insulation businesses.  It will take a couple of quarters for those price increases to be reflected in financial results, however.  As a result, we do not see a rush and expectations for 4Q 2014 are still elevated.

We do expect to re-enter OC and this might be viewed as a trading call.  Those who have invested during (or traded in) periods of high volatility may agree that OC will likely have poor top-down risk style factors for such an environment.  We could be wrong in pulling the name, but can also return to OC once the storm has passed – even if the shares are higher. 

OC: Removing Owens Corning from Investing Ideas - owens