The upside bias we've seen this week continued to run its course today as the market closed with nice gains, albeit on extremely low pre-holiday volume.
Money managers continued to chase yield as the year draws to a close, padding their portfolios with blue-chip "Dogs of the Dow." Telecom plays Verizon ( VZ ) and AT&T ( T ) are seeing some of that buying interest, as have some pharmaceutical names like Pfizer ( PFE ) and Merck ( MRK ). Utilities like Consolidated Edison ( ED ) and Southern Co. ( SO ) have also been running higher. As much as we have liked some of these utility and pharma plays in the past, we urge investors to exercise caution as we get closer to the end of 2011.
Only one big-name stock we follow saw significant downside in today's trading. Shares of baby formula maker Mead Johnson Nutrition ( MJN ) were slammed yesterday and continued to move lower today following several negative analyst calls. Analysts are worried about ramifications stemming from a possible bacterial infection scare in its Enfamil formula.
"Long Runway" to Trying to Find a Profit
I've been hearing the term "long runway" a lot lately. The term is used frequently amid the media hoopla surrounding startups receiving Many millions of dollars in financing. Twitter, for example, recently announced a $300 million injection from a Saudi Prince that apparently values the company at around $10 billion. What is that valuation based upon? Honestly, it's completely made up. The company is worth $10 billion because investors say it is.
It's possible that Twitter is running at a profit, although this claim has been disputed. It likely depends on what sort of "creative accounting" metrics you want to use.
Anyway, the term "long runway" is being applied to startups who begin with no real business model. Eventually, be it five or ten years down the line, they'll figure out how to make money. The "long runway" to profitability is padded by multiple layers of financing to build out the user base. At some point, all of those users will be used to generate revenue. But as I mentioned earlier this week, Wall Street hasn't taken too well to money-losing and super-hyped startups that have debuted with IPOs this year.
As a business owner myself, my best advice for anyone looking to start their own company is to focus not just on building revenue, but on turning profit. Don't get lulled into a sense of security by all the media hype about startups and all things unprofitable. The media is very good at coining super-cool phrases and shining up you-know-what and calling it gold!
A Deluge of Information: Is any of it Useful?
We realize there is a glut of financial information available everywhere you turn. That's why we developed a simple, easy to use investment ratings system for dividend research, which we are now proudly the leader in.
In my days as a full-time trader, I sifted through every area of investing research I could find. I eventually concluded that most of it was pretty useless. Thus, I set out to develop a powerful but easy-to-understand source for everyday investors to use for years to come. I focused on dividend investing, because it's the only method that actually produces timely and consistent results over the long term.
Unlike many investing services, we at Dividend.com are not afraid to tell subscribers to exit or avoid a certain stock or sector if we see trouble ahead. Only the absolute cream of the crop will ever make it on our Best Dividend Stocks List .
Everywhere you turn, people are developing models that start out with good intentions, but never evolve into anything more than a sports handicapper knockoff approach. Perhaps you recognize some of these bogus claims:
- "Check out our hot penny stock pick of the day!"
- "Subscribe to Mr. Smith's trading service - he's made money in 80 straight trades!"
- Follow this person on Twitter - they have a hot hand!"
I'm sure you get my point by now. There's a sea of information out there, but much of it is intended for daytraders. It's completely useless when it comes to creating a solid portfolio of assets that produce ongoing income.
At the end of the day, taking financial responsibility and knowing what you can afford to do is essential. I talk about investing in quality dividend-paying stocks as a great way to build up your future income, but if you are spending like there's no tomorrow, then you risk negating all the good you've done on the investment side of things. We'll continue to do our best at Dividend.com to help you find new income sources you can begin to build or add to positions in, but the rest of your financial health will depend on some of the things I mentioned above. Get to it as fast as you can and you'll be happy you did.
Our Beat The Markets with Dividend Stocks eBook Has Arrived!
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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! So head over to the Dividend.com Premium homepage now to download your copy.
A Look to Next Week and a Weekend Preview
Looking ahead to next week, we will see little in the way of earnings as the markets will be closed for Christmas Day on Monday and we will likely see light volume for much of the holiday-shortened week.
Be sure to catch up with our latest watchlist updates this weekend on Dividend.com Premium , including reports on earnings/story stocks, analyst upgrades/downgrades, dividend ETFs, and much more. And as always, you can view our current recommendations on our industry-leading Best Dividend Stocks List .
* Quick Note - The "Weekend Edition" Newsletter will be sent out on Monday this week (instead of Sunday) due to the Christmas holiday.
Thanks for reading, and I'll see you this holiday weekend! 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.
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