Market Wrap-Up for May 21 (FB, LOW, CPB, BA, CAT, HON, more)


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It was a snap-back Monday for the U.S. averages, as traders dug their heels in and bought their share of high-beta stocks that have been hit hard this past month. I certainly don't miss the days of waiting for those bounces, whenever I let my trading discipline down (which happened less and less after learning some crucial early lessons).

Looking at today's action, the bounce did not help the earnings stories of Lowe's ( LOW ) and Campbell Soup ( CPB ). On the flipside, positive analyst commentary helped lift stocks like American Eagle Outfitters ( AEO ) and Boeing ( BA ). Commodity/Capital goods plays like Caterpillar ( CAT ), Deere ( DE ), and Honeywell ( HON ) also regained a bit of their losses from the past month or so. It's too early to tell if today marks any significant bottom for the averages, but I have more thoughts on what investors should be contemplating at this stage of the game below.

Life After Facebook IPO

As Facebook ( FB ) shares fell (down 12% by the close) and business commentators backpedal about what went wrong with the IPO, life for dividend investors simply proceeds as normal. The pomp and circumstance of the IPO has passed and retail investors who bought the stock are likely wondering, do I buy more, or do I sit pat? Most won't think about selling at a loss, because human nature makes it very hard for inexperienced investors to accept bad trades/losses.

The business media is frantically trying to make sense of Facebook's early price weakness. Of course, the media won't look at itself for making retail investors foam at the mouth about the IPO in the first place. Instead, they're blaming Wall Street, the underwriters, or the Nasdaq exchange itself for having trade execution issues. Smart dividend investors will look back on this story as just another lesson to keep in mind when they're tempted to roll the dice on a hot new "can't-miss" IPO.

Following the recent wider market pullback, we continue to look for more dividend opportunities. All the while, we're closely watching our current picks to see if they still warrant new investing capital. If we see danger signs for the business of one of the stocks we recommend, we will not hesitate to say "sell" altogether (although most of our downgrades are simply "holds").

What Should Scare Dividend Investors the Most

It's funny, we almost never get users e-mail us worrying about markets when they are ripping higher, but as soon as the selling stretches more than a few days, fear takes over. Ironically, it is when the markets are ripping higher that we are at our most uncomfortable position. You see, we are trying to avoid situations where investors are putting fresh capital into stocks that have run too far, too fast. No one usually likes to see us downgrade a stock they own from the Best Dividend Stocks List , but we have to stick to a discipline that has worked well over the years.

That's not to say that sell-offs don't concern us, but when we feel our recommendations are positioned well, we look at the pullbacks as more opportunity than anything else. Again, if stocks we like are down on stock-specific news, that would warrant a close look, but when the overall market is down, we are certainly not rattled. When the job is building wealth over the long term, day-to-day moves will look miniscule when you look back over your investing lifetime.

Our job at is not to find individual trading ideas and pump up investing as a sport. Instead, we see what we do as an ongoing education process that we humbly feel includes ongoing lessons for ourselves as well. All the while, investors pile up dividend payouts month after month and see their portfolios climb year after year, helped by the power of compound interest.

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I hope everyone had a chance to check out our Premium members-only weekend articles , including new features that highlight some of the biggest winners and losers from the week that was, such as analyst upgrades/downgrades and earnings/story stocks. These articles are a great way to catch up on the week that was in the markets. We also have a rundown of how various Dividend ETFs performed on the week.

Thanks for reading everybody. I'll see you tomorrow!

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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