Westport Innovations Inc. (TSX:WPT)(NASDAQ:WPRT) investors’ hopes to see the beleaguered stock gain some ground in December were dashed the very first day of the month when the stock dropped more than 3% to hit its all-time low.

While sharp drops in Westport’s stock without valid triggers isn’t anything new, yesterday’s fall comes on the back of a development that investors cannot ignore.

The big blow

Investors know by now that whatever little income Westport currently earns comes from its joint ventures with Cummins (NYSE:CMI) and China-based Weichai. Latest developments, however, signal trouble for both.

The Bank of America/Merrill Lynch downgraded Cummins to sell yesterday, sending the engine maker’s stock plummeting by more than 8% during the day.

Analysts at Merrill Lynch fear that a slowdown in the U.S. truck market and sluggishness in China could weigh on Cummins’s sales. Needless to say, that will also hurt Cummins-Westport’s revenues, which is primarily why Westport’s stock took a dive after the news of Cummins’s rating downgrade hit the market.

The bad news doesn’t end there

In fact, there’s double trouble here. Analysts at Merrill Lynch predict a further devaluation of Chinese currency, which could hurt the industrial sector, including transportation. It doesn’t help that the Chinese trucking market is already witnessing significant declines on production volumes and order rates.

For perspective, industry demand for medium- and heavy-duty trucks in the nation slumped 24% year over year during the third quarter, and Cummins expects full-year industry sales to decline 30%.

Any further weakness in China is double whammy for Westport as it’ll hurt sales from both of its ventures with Cummins as well as Weichai. The pain is already visible in Westport’s numbers: Weichai-Westport’s revenue slumped a whopping 81% year over year in Q3, with Westport’s share of operating income from the venture plunging 88% year over year.

This risk isn’t worth taking

Westport’s challenges are only multiplying. A slowdown in key end markets is the last thing a loss-making, cash-strapped company wants to hear. And when you factor in Westport’s impending acquisition of another loss-making company, Fuel Systems Solutions Inc., you know the company is digging itself a deeper hole.

Cummins’s rating downgrade and bad news from China have added salt to the wound, and I’m afraid investors may lose patience by the time the wound heals.

Avoid the risk, because there's a better alternative for you right now.

The one stock you want to own before 2015 ends

Does your portfolio have rock-solid blue chips at its core? If it does... GREAT! If not, you might want to reconsider your strategy, especially if you want to avoid the risks that a stock such as Westport Innovations comes with.

Keeping that in mind, our analysts have identified one TOP stock for 2015 and beyond--a stock with a tollbooth-like business; a solid management team; and a reliable, consistent, and rising dividend. The best part--you can download the name, ticker symbol, and price guidance absolutely FREE today.

Simply click here to receive your Special FREE Report, "1 Top Stock for 2015--and Beyond."


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool owns shares of Cummins.