It was a feel-good Friday for the markets as investors continue
to dance through the ups and downs of the volatile market action.
The markets were welcoming further "do whatever it takes"
commentary from euro zone leaders during today's session.
We saw shares of online travel play Expedia (
EXPE
) spiking higher on
blowout earnings results
. With results that impressive, you would think airline companies
could figure out a way to grab some of the consumer demand to book
online and see those results go to their own bottom line. Alas,
most major air carriers continue to struggle, and have been
terrible investments for decades.
Also higher on an earnings beat this morning were shares of big
pharma play Merck (
MRK
). On the downside however, investors did not like the news from
Starbucks (
SBUX
), Newmont Mining (
NEM
), or D.R. Horton (
DHI
). Also getting hit were shares of Facebook (
FB
), ending down nearly 12%.
How timely was
our
commentary yesterday
regarding Wall Street and their disregard for fundamental valuation
metrics? If you'll remember, we tore apart one analysts' view that
the success of Facebook's first earnings report since their IPO
would depend on their user base, not on actual earnings. Well,
their actual earnings stunk, and the stock is down over 13% today
as I write this.
Stimulus and the Need for Yield
One lesson that Federal Reserve chairman Ben Bernanke is
probably learning (and re-learning) is that once you turn the
stimulus faucet on, it is quite difficult to shut it back off
(despite the many solid arguments that quantitative easing is only
prolonging the eventual washout). As a result, investors have faces
quite a dilemma for the past few years. What's the best place to
invest our assets?
Just a couple of days ago, IBM Corp (
IBM
) obtained a record-low 1.875 percent coupon on $1 billion of
10-year bonds. Hats off to the brokers that were able to convince
investors to snap up those bargains (sarcasm implied). Here's the
crazy thing though. If we follow the path of Japan, and the
deflationary effect they've seen for the last couple of decades,
then those investors at 1.875% will actually look like geniuses!
Crazy market, huh?
Here at Dividend.com, we are weighing these factors as we try
and determine the risk/reward for quality dividend-paying stocks.
With valuations for even mediocre-yielding stocks skyrocketing, our
job has become all the more difficult. As always, we're
concentrating our research on company fundamentals. In the end,
earnings growth will always separate the winners from the
losers.
Our
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A Look to Next Week and a Weekend Preview
Looking ahead to next week, third quarter earnings will be in
full swing once again, as we are expecting results from Pfizer (
PFE
), Kraft Foods (
KFT
), Comcast (
CMCSA
), and Time Warner (
TWX
), just to name a few. The focus will likely be on the economic
data as well as the latest Wall Street analyst calls.
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here
.