The first thing we did this morning was check to see how the
overseas markets would be trading following yesterday's late-day
bounce on Wall Street. Unfortunately the gains were much smaller
than most had expected.
This point was somehow overlooked by Wall Street analysts,
because outside of Jefferies & Co. speaking cautiously about
the retail sector, it was business as usual with dozens - if not
hundreds - of bullish upgrades today.
We, however, are not ignoring the market uncertainty that has
dominated the trading action of the past several sessions. As you
can see from today's moves (
12 stocks taken off our recommended list
), we are remaining alert to the potential risk for further
downside.
Looking at today's biggest market movers, we saw shares of Walt
Disney (
DIS
) getting hit hard (closing down 9%) following the company's
earnings results. On the flipside Polo Ralph Lauren (
RL
) finished up over $5 on its big earnings beat. Shares of Capital
One Financial (
COF
) bucked the selling and traded slightly higher following the
announcement it will be acquiring a gigantic credit card unit ($33
billion) from HSBC (
HBC
). It would seem a very risky move to make and almost reminiscent
of companies buying mortgage firms as the real estate market was
peaking. The bet for Capital One of course is that consumers will
continue to spend at the high rate they have been spending for
years. If the job market doesn't continue to worsen, they may be in
good shape, but still a risky bet in my opinion. Don't forget that
Capital One just wrapped up a fairly large acquisition of ING
Direct not too long ago.
Meanwhile, the
Jefferies downgrade of several retail stocks
is hitting those stocks in this weak open. Pushing the way lower
were shares of Target (
TGT
), Home Depot (
HD
), and Kohl's (
KSS
). Investors once again piled into the SPDR Gold ETF (
GLD
) with the equity markets selling off.
People have become increasingly disenchanted with the volatility
we are seeing on Wall Street, but as I have said in the past, if
you can stick to a good selling discipline, you will avoid any
blow-ups in your portfolio, all while allowing your nest egg to
continue to build. For those of you who may be new readers, today
is a good day to go over what I consider a good method for a
selling strategy.
If the stock you own in your portfolio drops 25% from its 52
week high, you should put it on your radar and find out exactly why
the stock has dropped. There are usually two reasons why a stock
falls. Is it company specific news pulling the shares lower, or is
the overall market lower and the stock is just moving in lock-step
with the selling? Investors can not be afraid to trim a position.
Remember, there have been many formerly great brands that have lost
their way, despite paying dividends for many years (General Motors,
Eastman Kodak, etc.). It is every investor's responsibility to take
charge of their portfolio and have the discipline to make changes,
and that includes selling a stock that is pulling down a
portfolio's performance. We are in a similar market environment
that we saw back in 2008, despite numerous market pundits saying
that isn't the case. At Dividend.com, we will will make the tough
calls, whether they are sell calls or simply calls to avoid adding
to current favorites at this time (as we did earlier today with a
dozen stocks).
With the Federal Reserve going on record yesterday stating that
interest rates are going to stay extremely low for the next couple
of years, investors still need to make up for that continued lost
income - and dividend stocks will still be a great way to
accomplish that. That means our team at Dividend.com needs to be as
accurate as possible with our calls. That will always be our main
objective, regardless of market the environment.
Thanks for reading, and I'll see you tomorrow! P.S. Please pass
this e-mail on to someone you think can use some financial
motivation as well as being kept in the financial news loop that
could affect them.
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here
.