Market Wrap-Up for Nov.20 (BBY, HPQ, HNZ, HRL, WFM, more)
Plenty of individual company headlines were making waves today, however, none bigger than the accounting scandal regarding Hewlett-Packard’s multi-billion purchase of UK-based Autonomy Corporation.
As if HPQ needed any further clouds hanging over the company, this morning’s news really puts it in even further disarray as the company tries to stabilize revenue declines across many parts of their business. More on HPQ below as well as Best Buy (BBY), which is also in the news following another earnings disappointment. Both shares are trading lower as more value investors lured into the stocks wave the white flag.
Elsewhere, shares of Hormel Foods (HRL) and H.J. Heinz (HNZ) finished the lower following their earnings results. These two companies however are trading near all-time highs and are seeing a bit pf profit-taking as opposed to the situation describing HPQ and BBY. Lastly, there was some green on the screen with positive Wall Street commentary helping boost shares of Whole Foods (WFM) and Archer Daniels Midland (ADM).
Take The Dividend out of the Equation
The free-fall we continue to see in stocks like Best Buy (BBY) and Hewlett-Packard (HPQ) once again underscores the dangers of being lured in by the term “value.” The business media tosses the “value” term around very loosely, and these supposed turnaround stories are a dime a dozen. I can’t tell you how many times I’ve heard rumors of big-name executives coming over to fix things, star investors sniffing around for a potential sizeable stake, and even existing management taking a company private since Wall Street is badly undervaluing the deep inherent value of its assets.
As dividend “value” names sink further with business revenues already in a spiral, there will soon be new names that will be heralded as amazing value deals. The analysis will include the dividend yield as part of the lure. Don’t buy that rationale. As I said in the title above, take the dividend component out of it. Is the business capable of a real turnaround or are you considering a purchase built around simply hoping that bad news will suddenly stop?
Rather than playing in what some perceive as deep “value,” usually the smarter play is to stick with proven investments that are not in a revenue free-fall. Too many investors focus on bargain shopping and tend to hold on to losing positions, essentially disagreeing with the market on the true value of a company’s future prospects. Have we seen turnarounds happen? Certainly, but more often than not, it is wiser to move on to other investment opportunities once the first sign of smoke is spotted.
Dividend Stock Removed from Recommended List
We removed another dividend stock from our Best Dividend Stocks List this morning. We still like the company overall, but would wait to add new money to the shares for now. Check out the name we downgraded along with a full explanation here.
Thanks for reading everybody. I’ll see you tomorrow!
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