The Dow Rebounds on Pharma, DuPont Strength, but Will the Gains Last?

The Dow bounced back from Monday's steep declines, but investors don't seem optimistic about the stock market's ability to hang onto its gains today. Find out why.

Feb 4, 2014 at 9:01PM

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 yesterday's drop of more than 325 points for the Dow Jones Industrials (DJINDICES:^DJI), investors were ready for a respite, and today's 72-point gain gave them at least some comfort from what has been a terrible beginning to the year. Yet even though pharma giants Merck (NYSE:MRK) and Pfizer (NYSE:PFE) joined chemical company DuPont (NYSE:DD) in leading the Dow higher Tuesday, it's far from clear whether the Dow has actually finished its downward move to begin 2014.

Strength from pharmaceutical stocks Pfizer and Merck, both of which rose 2.75% today, has come from a number of corners. First, declining bond yields have helped support their share prices, as many investors look at their relatively low growth and high dividend yields as making the stocks more like bond substitutes than legitimate growth candidates.

Yet the two companies also have opportunities to streamline their operations. Merck earned an upgrade from analysts at SunTrust today, who argued that the combination of cost cutting, more favorable drug development, and smart internal corporate restructuring efforts could boost shares in the near future. Analysts at Jefferies cited nearly exactly the same factors in upgrading Pfizer, also including the anticipated fast-track approval process and launch of the company's palbociclib breast-cancer treatment by the end of the year.

Meanwhile, DuPont gained 2.7% despite the resignation of chief marketing and sales officer Scott Coleman this morning. There's no obvious reason to think that Coleman's departure was linked to DuPont's evolving strategy to emphasize its agricultural sector over its traditional chemicals business, but aligning top executives to move the company forward in the direction of higher margins will be critical for the company's future success. DuPont's restructuring strategy has plenty of potential to bring profit growth, but it will take time for the company to realize that full potential.

Long-term investors shouldn't get bogged down in whether today's smaller gains compared to yesterday's bigger losses imply that further declines are likely. Finding an investment strategy that works regardless of whether stocks move up or down in the next day or week is essential to keep yourself from becoming an emotional wreck in the wake of rising volatility.

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Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. 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.

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.

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