What an unusual trading day it turned out to be today. We had
the expected bounce this morning and it looked like clear sailing
until the Federal Reserve commentary was released at 2:15pm Est. It
was then revealed the fed is intending to keep interest rates low
through mid-2013! The markets saw a quick drop, then a rally back
up, only to see the Dow drop 200 points, but then rally back up to
close at the highs (up 400 points). You following this? This is not
the sort of market stability that can inspire too much investor
confidence in the short-term, but we'll take the gains as it will
allow some investors to re-position out of weak stocks they may own
in their portfolio.
Looking at today's action, we saw a plethora of upgrades in the
transports space, with railroad plays getting a thumbs up from
several Wall Street analysts. Leading the way higher were shares of
Union Pacific (
UNP
), CSX Corp (
CSX
), and Norfolk Southern (
NSC
). Other upgrades that popped up on our radar were for shares of
CBS Corp (
CBS
) (has been a strong name in 2011), Humana (
HUM
) (likely cuts in medicare are not worrying analysts at this
point), and Wells Fargo (
WFC
) (financials are constantly getting defended on the street, but
I'm skeptical that business is anywhere near firing on all
cylinders).
Outside of Mastercard (
MA
) and Visa (
V
), it's hard to find much performance in the U.S. financial sector.
If only those stocks gave us better dividend yields, we'd put them
on the income bandwagon. Earnings results pushed shares of
Enterprise Products Partners L.P. (
EPD
) higher. As we mentioned yesterday, the MLP space could be in for
some turbulence as lower oil prices begin to take hold. That said,
we are carefully evaluating the sector. Lastly, Cablevision Systems
(
CVC
) finished lower following the company's earnings results.
Weaker-than-expected subscriber additions are hurting those shares
today.
It was no surprise to see analysts come out in droves this
morning with numerous upgrades. That's what Wall Street does. They
rarely tell you to take much caution. As a matter of fact,
StreetInsider.com reported 243 upgrades compared to 93 downgrades
since Friday of last week. For every downgrade, the Street's
analysts are doing almost 3 upgrades. Look at the bottom-fishing
calls we have seen with Bank of America (
BAC
), which slipped below $7 during the market meltdown yesterday.
Unfortunately because the stock is now trading in single digits,
the retail investor's eyes become like sewer caps, as the stock
begins to look "cheap." The stock traded 681 million shares
yesterday! That's some incredible volume. We are in a dangerous
market, and trying to catch bottoms for stocks like BAC is only
suitable for the most nimble and experienced day-traders.
Much of the financial media is focused on rallies only
sustaining if Gold prices (
GLD
) fall. However, we have seen gold prices move up in lock-step with
the market rallies off the March 2009 lows. Conventional wisdom
about the inverse relationship between the stock market and gold
prices should be thrown out the window here - maybe for good.
Clearly, this is a time for investors to zero in on yield and be
very selective. Unlike the usual commentary where things are
painted as extremely opportunistic when stock prices fall, I put my
guard up and try to narrow my areas of focus so that we are
optimizing the
"Best Dividend Stocks" List
in the event stock prices remain in any prolonged downtrend. Now if
the market is making you lose sleep, then you may need to hit the
pause button on putting new money into stocks for the time being.
Remember, though, your long-term focus should be on buying
income-producing assets, so you need to consistently find the best
targets no matter what the market environment is. Anyone who has
set up a watchlist on our site has probably noticed a bunch of
email alerts coming to your inbox the last couple of trading
sessions. We continue to make the appropriate ratings changes we
see fit in this fast-moving market.
When it comes to cleaning up your portfolio (pulling out any
stock "weeds"), pay close attention to those you own that drop 25%
or more from their 52-week highs. Speaking of cleaning up your
portfolio, please be sure to check out the
dividend stock we removed from our recommended list
today
if you did not read the e-mail alert we sent out earlier today. If
you are adamant about never selling your shares, just take a look
at what happened to former giants like General Motors (
GM
) or Eastman Kodak (
EK
). Selling is a virtue when there are better opportunities out
there!
At worst, I advise holding off adding to any positions that are
seeing heavy losses. Drawing a line in the sand in the kind of
market we're seeing right now can be very dangerous. Sadly, there
have likely been tens of thousands of traders that have been
knocked out of the game in the last couple of weeks. For some, it
could be simply a lack of experience in trading markets that don't
bounce on every dip, and for others, simply gambling heavy margin
positions. For all those who get excited about the idea of trading,
take the lessons from the last few weeks and understand why in the
end, trading for a living is as hard a profession as you can
tackle. It makes us feel really good at Dividend.com to know that
we are helping investors understand the path to growing wealth is
by buying income-producing assets. We have plenty of stocks that
will throw off solid cash flow for years to come.
Dividend investing allows an investor the opportunity to put
compound interest to work for them, and it's never too early or too
late to become a dividend investor. The key is once you start, you
need to stay consistent and make money available to put to work for
you. That's it. Don't count on the government or your employer to
set you up for a remarkable retirement. Take control, do your own
research, and create one for yourself. It's great to hear from
subscribers that have said they are seeing superb results, and for
the first time feel like they have an actual game plan for building
and maintaining their wealth. The best thing we can do as
individual investors is look for opportunities where we receive
great income (dividends) from the companies who can best weather
the economic storms ahead. You can count on Dividend.com to be your
guide in that arena. As always, you can find all of our current
recommendations on our industry-leading
"Best Dividend Stocks" List
.
Let me leave you with this quote from 19th century author Mark
Twain that should sum up what investors are likely feeling:
"Courage is resistance to fear, mastery of fear - not absence of
fear."
As I mentioned above, drawing lines in the sand with the wrong
stocks can be the worst thing you ever do in your investing
lifetime. Always respect what the stock tape is trying to tell
us.
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
.