How does this news change James Hardie's valuation relative to its industry peers and affect our position sizing or risk management strategy?

Valuation impact:

The 34 % plunge wipes out roughly ½ of James Hardie’s market‑cap in a single day and drives the price‑to‑earnings (P/E) and EV/EBITDA multiples far below those of the core building‑products peer group (Etex, Saint‑Gobain, USG, etc.). Pre‑news Hard‑on‑cash‑flow EV/EBITDA was ~8×; today it sits near 4–5×, while peers still trade around 7–9×. The “destocking” revelation also forces a downward revision of forward sales guidance and introduces a contingent‑liability head‑wind from the Hagens Berman lawsuit. In a relative‑valuation framework the stock now looks markedly cheaper, but the discount is largely a risk premium rather than a pure value bargain.

Risk‑adjusted positioning:

Given the heightened legal and operational uncertainty, the appropriate exposure should be scaled back dramatically. A rule‑of‑thumb – limit any single‑name short‑term risk to ≤1 % of portfolio equity – would translate to a 0.5–1 % weight in JHX (versus the 3–5 % typical for a high‑conviction name). If you choose to stay long, set a tight stop just above the recent intraday high (≈ $12.30) to protect against further erosion; a breach would trigger an exit and re‑evaluate the case once the lawsuit clears. Conversely, a short‑bias can be taken with a stop near the 20‑day moving average (~$11.80) and a target around the 200‑day low (~$9.00). In both cases, keep the position size small, monitor volume spikes and any updates from the SEC or the court, and be prepared to hedge with sector‑wide put spreads if broader construction‑materials risk re‑emerges.