Market Wrap-Up for July 18 (VZ, MS, INTC, IBM, more)

Market Wrap-Up for July 18 (VZ, MS, INTC, IBM, more)


The major indices rose today — the Dow and S&P 500 closed at record highs, in fact — spurred by a number of better-than-expected earnings reports and a big beat by the Philly Fed manufacturing index. Nonetheless, Wall Street was keeping a close eye on Washington yet again, as Federal Reserve Chairman Ben Bernanke went to Capitol Hill for day two of his semi-annual Congressional testimony, this time addressing the Senate Banking Committee. However, in a repeat of the market reaction following the House Financial Services Committee’s Q&A yesterday, Bernanke’s comments today did not do much to move the markets.

Among the stocks that closed higher today due to better-than-expected earnings were PPG Industries (PPG), Safeway (SWY), Johnson Controls (JCI), Xilinx (XLNX), IBM Corp (IBM), Morgan Stanley (MS), Blackstone (BX), BlackRock (BLK), SLM Corp (Sallie Mae) (SLM), and KeyCorp (KEY). However, not all earnings pleased investors today; shares of Verizon (VZ), Intel (INTC), Danaher (DHR), American Express (AXP), Amphenol (APH), and Sherwin-Williams (SHW) plummeted after financial report misses.

Moreover, Wall Street analyst upgrades of Quality Systems (QSII) and Lincoln National Corp (LNC) helped those stocks climb into positive territory. Meanwhile, downgrades of Merck (MRK) and Northern Trust (NTRS) caused those shares to decline.

Be sure to check the Dividend Daily for all the latest earnings reports, analyst moves, and much more.

Don’t Be A Follower; You Don’t Always Know Who the Leader Is

Last night at CNBC and Institutional Investor’s third annual Delivery Alpha Conference, well-known activist investor Carl Icahn delivered some comments that caught my attention. Though he addressed a number of topics during his Q&A session at the event, his comments with regards to his big position in Herbalife (HLF) struck me as a bit alarming.

Icahn jumped into his long position in Herbalife after fellow activist investor Bill Ackman said he was shorting the stock (in other words, he was betting that the stock would fall in price). Subsequently, the two have had a number of disputes in the media regarding their respective positions. During his Q&A last night, Ichan dove a little deeper into this thoughts behind his Herbalife stake and views toward Ackman. From what I gathered, Icahn is not investing in Herbalife because he likes the company or the stocks; he is more-or-less playing chicken with a fellow billionaire hedge fund manager for kicks.

What worries me about this behavior is that individual investors might be following Icahn into a position in Herbalife. These individuals may end up putting too much faith into his knowledge and actions just because he is a well-known, billionaire, hedge fund manager. Investors might think that Icahn knows something they don’t; after all, the stock is up 68% year-to-date. However, investors should take whatever Icahn says regarding his position in HLF with a grain of salt. For all we know, he could get bored with his little game of wits with Ackman and take the profits from his investment tomorrow, leaving the rest of the investors who followed him into the position in the stock in the dust as the price falls.

In the end, your investments should not be made because you follow a well-known, billionaire investors into a position. These big-name money managers have the capital and the ability to assume high levels of risk, unlike most retail investors. Ultimately, you want to continue to make your long-term investment decisions based on fundamentals and your own research.

Thanks for reading, and we’ll see you tomorrow!

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