By: Dividend Daily
November 16, 2011 at 16:17 PM EST
Market Wrap-Up for Nov.16 (MS, TGT, ANF, JPM, C, TYC, GS, more)
The markets attempted to stabilize after an early drop, but buyers began pulling back following cautious comments from new Greek Prime Minister Lucas Papademos, who cautioned that the financial crisis in Greece could be intensifying. We also had oil prices popping back over $100 a barrel and late in the day, Fitch ratings agency sent out a precautionary note saying the credit outlook for U.S. banks could worsen if the euro-zone debt crisis is not resolved in a timely manner. Volume picked up as well by the close and is something we are taking note of.
The resulting headline from Fitch sent financial shares reeling, with losses led by Morgan Stanley (MS), Goldman Sachs (GS), Citigroup (C), and JP Morgan (JPM).
Elsewhere, earnings results helping shares of Tyco International (TYC) (report here) trade higher, bucking the overall market weakness. Shares of Target (TGT) saw most of its gains dwindle away by the close following that retailer’s earnings release (earnings report coverage here). Meanwhile, shares of teen retailer Abercrombie & Fitch (ANF), were slammed, ending the day down nearly 14% today following a disappointing earnings report.“Underwater” Mortgages on the Rise
The latest study from leading web real estate company Zillow.com this past week shows almost 29% of homeowners owe more on their mortgages than their homes are currently worth. The firm points to the increased time required for foreclosures to sell as putting an overhang on the overall health of the real estate industry. Current estimates suggest it would take more than eight years to clear just the 2.1 million homes in foreclosure or with seriously delinquent mortgages.
The million dollar question is “When will real estate bottom?”. The data points above indicate it won’t be any time soon. That’s doesn’t mean an income investor interested in real estate can’t find good opportunities, but real estate is a numbers game. Do the simple math: will the cash flow from the investment property cover your mortgage and expenses? If so, then you may have a candidate. I stress the word “may” in that sentence, because you still need to factor in the possibility of being unable to find a renter. That means you’d need to carry the mortgage on the property for several months on your own.
And whatever you do, don’t let a realtor convince you that finding a good tenant is a piece of cake. It’s always easier said than done. In the end, we prefer dividend stocks to investing in real estate anyway. And you’re really interested in real estate, another option is to think about investing in Real Estate Investment Trusts (REITs).The Fallacy of Price Targets
The business media has built a lot of appeal by delivering so-called “actionable” market calls. I get nauseous whenever I hear someone refer to the “guy on TV that says stock XYZ could reach $100 a share in the next 12 months,” and then proceeds to act on those “as seen on TV” recommendations.
We cover a handful of major brokerage firm calls each day on The Dividend Daily, and commonly mention what the analyst sees as a price target. However, when it comes to our own recommendations, we avoid any sort of targets. Make no mistake about it: putting out a price target is nothing but pure guesswork, and is not our game.
In fact, we will point out how ridiculous some of the price target changes can be from time to time. For example, a stock will drop from $60 to $20 and then an analyst will cut his price target from $100 to $50, but keep the stock as an “Outperform.” Anyone that got thrilled enough to put money to work at $60, knowing the analyst had a $100 target, got the short end of the stick. Sadly enough, this phenomenon happens on a daily basis.
Keep these points in mind as we at Dividend.com help you navigate through the regular ups and downs of investing.A Dividend Capture Strategy for Active Investors
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Thanks for reading everybody. I’ll see you tomorrow!
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