Dow Tumbles With Costco but Visa and MasterCard Soar

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks pulled back today as investors reacted to yesterday's apparent congressional budget deal as the Dow Jones Industrial Average (DJINDICES: ^DJI  ) fell 130 points, or 0.8%, while the S&P 500 dropped 1.1%.

Visa (NYSE: V  ) led the Dow winners, gaining 3.1%, as it jumped on good news from rival MasterCard (NYSE: MA  ) , whose shares jumped 3.5% after announcing a 10-for-1 stock split and a $3.5 billion repurchase plan. With a market cap of $95 billion, the $3.5 billion repurchase program should lift earnings per share over the long run by about 3.5% so today's jump may be a little exaggerated. Stock splits, while often generating attention and enthusiasm, should have no effect on a stock movement. The credit card company also said it would hike its quarterly dividend to raise its yield from 0.3% to 0.55%. Both companies have relatively low dividend yield, but rake in gobs of free cash flow. Many market observers expect the capital being returned to shareholders to increase.

Warehouse retailer Costco (NASDAQ: COST  ) finished down 1.2% after it missed on top and bottom lines. While retailers across the board have struggled this quarter, Costco as a low-price competitor with a membership model seemed immune from the industry's woes but that was not the case. Earnings per share came in at $0.96 against estimates of $1.02 as expenses grew faster than revenue. Expenses for employee stock option grew 24% due to a large gain in the company's stock price this year, and sales moved up 5% to $24.47 billion, short of estimates of $25.35 billion. Same-store sales were up 3%, or 5% excluding changes in fuel prices and currency translation, indicating the core business remains strong.

Make money money
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report, "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2762205, ~/Articles/ArticleHandler.aspx, 4/23/2014 9:37:57 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement