As you can see by today's nervous market reaction to the
bipartisan "Super Committee" failing to agree on a U.S. debt
budget, regulators are struggling to decide which of the special
interests will see smaller pieces of the budgetary pie. This latest
governmental delay certainly won't help Congress' already terrible
A failure to pass an agreement would result in $1.2 trillion in
automatic spending cuts across much of the federal budget starting
in 2013. These cuts would be evenly divided between defense and
At this point, no one is certain how the situation will play
out. Potentially, a scaled-down version of cuts could be
implemented as a short-term patch. The risk, of course, is that
failing to come to a long-term resolution may put the U.S. at risk
for another debt downgrade. If you remember, S&P cut its "AAA"
rating on U.S. debt for the first time ever back in August. Moody's
or Fitch (the other two big ratings agencies) could possibly decide
to follow suit.
We'll be watching these events closely and continue put great
emphasis on having the best names for investors to consider putting
capital in - regardless of the economic situation. We made it
through the market meltdown of early 2009 with only six names on
Best Dividend Stocks List
, and any investor that continued to average into those names have
been rewarded handsomely for avoiding trying to time the
As for the individual names moving in the markets today,
investors took aim at the financial sector for some of the early
selling (as has been the case whenever the economic headlines turn
negative). Leading the way lower were shares of Citigroup (
), Deutsche Bank (
), and Morgan Stanley (
). Wall Street analyst downgrades out this morning also made an
impact, pushing down several names, including REIT plays Vornado
Realty Trust (
) and Simon Property Group (
). Drug retailer Walgreen Company (
) also ended down following negative analyst comments as well.
There was no where to hide, including Gold (
), which saw the price of the yellow metal fall over $45 an ounce
to close well below the $1700 an ounce mark.
What Kind of Businesses are You Investing In?
We just watched the IPO of a company called Angie's List (
) this past week and the company's stock opened up at $18 a share,
valuing it at nearly $900 million. On the surface, that valuation
doesn't seem too far out of whack. But when you pull up the
numbers, the story gets more interesting.
In 2010 and the nine months ended September 30, 2011, the
Angie's List's revenue was $59.0 million and $62.6 million,
respectively. In the same periods, Angie's net loss was $27.2
million and $43.2 million. And this is for a company founded all
the way back in 1995. That's right, the company is somehow still
not profitable after 15 years!
There are plenty other companies that have recently had an IPO
or are set to debut in the next year or so, many of which will be
showcased as potential "home run" stocks for investors to consider.
It's not impossible for companies that lose money for years to
suddenly turn on the profit engine, but those are the exceptions to
the rule. Amazon.com (
), for example, lost money for years but turned the corner and has
never looked back.
Unfortunately the reality for investors is that many of these
unproven companies/business models will eventually flounder over
time. Remember the China-based web plays we pointed out to
investors back in June? Well the Facebook of China called Renren (
) is down to $4 and change from the IPO high of $24. Also, the
Amazon.com of China, Ecommerce China Dangdang Inc. (
) is down to less than $5 from its IPO high of $36.
You don't want to ever have to look back and say to yourself "I
can't believe I actually bought that stock." Whether Angie's List
or the China web plays we just mentioned ever prove to be good
investments or not, it's always scary to know a company has been
around for more than a decade, but is still not profitable. Many
investors have been seriously burned by hot new IPOs over the
years. Consider this fact as you analyze how you commit your
hard-earned capital over your investing lifetime.
Our "Beat The Markets with Dividend Stocks" eBook is Coming
We're putting the finishing touches on a brand new eBook (nearly
300 pages!), slated for release later this week. In this book, we
look ahead to 2012 and what could lie ahead for dividend investors.
A $39.95 value, the eBook will be a
Beat The Markets with Dividend Stocks
contains a full economic forecast for 2012, including in-depth
analysis on 65 of the biggest dividend stocks out there. It's a
great way to get prepared for your investing next year. We'll be
sure to alert subscribers as soon as the book is available!
I hope everyone had a chance to check out our
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