Johnson & Johnson Moves Higher, While Netflix and Michael Kors Tank

Dow, S&P 500, and Nasdaq all fight to get back to even for 2014.

Jan 7, 2014 at 1:00PM

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.

After starting the first three trading sessions of 2014 down 151 points, or 0.91%, the Dow Jones Industrial Average (DJINDICES:^DJI) is fighting back today, gaining 113 points, or 0.69%, as of 1 p.m. EST. The S&P 500 and Nasdaq also began 2014 poorly, respectively opening today down 1.16% and 1.5% for the year, but have increased by 0.61% and 0.88% by early afternoon.

One piece of major economic news that could be helping to push stocks higher was Monday's Senate confirmation of Janet Yellen as the next Federal Reserve chair. Yellen is seen to be rather dovish, and many believe she will sustain central bank policies seen under Chairman Ben Bernanke after his departure at the end of January. This kind of familiarity would be welcomed by Wall Street and most investors.

One Dow component having a solid day is Johnson & Johnson (NYSE:JNJ),  up 2.22%. The move comes after RBC upgraded the stock from sector perform to outperform. The analyst believes J&J's pharmaceutical business will continue to deliver above-average revenue growth. With a company as large as Johnson & Johnson it is very difficult to find even one unit that can produce growth above the 3% range, but the company's pharmaceutical unit has recently done just that. While this is just another analyst opinion, I tend to believe the company will see strong growth from that unit over the next few years.

Outside the Dow, the mighty Netflix (NASDAQ:NFLX) is having a rough day. The stock has lost more than $20 per share, or 5.6%. The decline comes after an analyst at Morgan Stanley downgraded the stock to underweight and cut the price target from $333 to $310. Scott Devitt said he believes that increased competition from, HBO, Hulu, and others pose a serious threat to Netflix. While Netflix may have the largest catalog of streaming shows and movies at this time, the competition and price tag for new content is increasing. Amazon, for example, has a much larger resource to pull funds from than Netflix, so if that content battle does play out, Netflix could be on the losing end of the stick.  

Another downgrade victim today is fashion designer and retailer Michael Kors (NYSE:KORS) which is off by 3.45%. Citigroup lowered its previous buy rating to neutral based on valuation. Over the past 52 weeks the stock is up nearly 55%, so the valuation has been stretched, but so have earnings during that time period. The stock trades at 32 times earnings, with a future expected P/E of 22. When we look around the fashion world shares of lululemon athletica trade at 30 times, Under Armour is at 63 times, and while Michael Kors' closest competitor Coach is only trading at 15 times past earnings, Coach has seen a dramatic slowdown to its growth over the past few quarters. Michael Kors is still a growth company and so will trade at a premium to the market and carry a higher valuation. If investors believe the company can't continue its impressive growth, than they should sell, but not just because the valuation looks a little high.  

Regardless of whether you agree with with these upgrades and downgrades, investors need to remember that they are just the opinions of a few individuals and not guaranteed to happen. It is always best to take a number of differing opinions into consideration before making a buy or sell call, and a Wall Street analyst shouldn't carry more weight than anyone else.

More Foolish insight

If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.


Fool contributor Matt Thalman owns shares of, Johnson & Johnson, Lululemon Athletica, and Michael Kors Holdings. Check back Monday through Friday as Matt explains what caused the Dow's winners and losers of the day, and every Saturday for a weekly recap. Follow Matt on Twitter @mthalman5513

The Motley Fool recommends, Coach, Johnson & Johnson, Lululemon Athletica, Michael Kors Holdings, Netflix, and Under Armour. The Motley Fool owns shares of, Coach, Johnson & Johnson, Netflix, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information