The Dow's Wild Start is Actually Pretty Ordinary

Last year lulled a lot of investors into believing that calm was the new normal, but it's probably time to get used to ups and downs again.

Feb 4, 2014 at 12:00PM

The Dow Jones Industrial Average (DJINDICES:^DJI) was rather depressingly down yesterday. It hasn't quite recovered from that 2% drop -- the first one since last October -- but at least investors can take a breath today after watching the index fall nearly 7% since topping out at roughly 16,500 points in mid-January. This is certainly no reason to panic, but it's also important to put the market's recent moves in perspective.

The Dow has already endured five drops of 1% or greater in 2014. By the same point in 2013, the blue-chip index had not even seen a single drop of that amount. The first 1% decline last year hit the Dow on Feb. 25, and over the course of the year the index lost 1% or more just 10 times. The Dow hasn't yet finished up 1% in any trading day this year, which is a bit worrisome, as it enjoyed 14 trading days of 1% or greater gains last year, including two by the first week of February. Let's hope that these winter woes aren't indicative of the rest of the year; if they are, we're in for 52 more days of 1% daily declines in the Dow, but no 1% daily gains.

Fortunately, that sort of bad luck would be impossible. Even the worst years have at least a few big pops.

However, a year in which the Dow moves up or down by 1% 57 times would be exactly in line with historical averages, as Fool analyst Morgan Housel found while examining annual volatility all the way back to the Great Depression. More volatility doesn't have to mean lower gains, either, as many of the market's best years experienced an above-average number of daily 1% moves.

Today's big winner
Anyone talking about a retail slowdown needs to leave Michael Kors (NYSE:KORS) out of the discussion. The luxury retailer blew the doors off with its latest earnings report. Kors' earnings of $1.11 per share for the fiscal third quarter came in 73% higher than last year's $0.64 result, and also soared 29% above analysts' expectations of $0.86 per share. Kors' quarterly earnings have now surged 455% above where they were just two years ago, and the stock has actually fallen behind that blistering pace (the chart below has not yet been updated to include today's results):

KORS Total Return Price Chart

KORS Total Return Price data by YCharts.

There's still upside ahead, as Kors is valued at a reasonable forward P/E of 30, based on full-year earnings-per-share estimates of $3.07 to $3.09 for the fiscal year that will end in March.

Today's historical tidbit
Don't forget to click "Like" on this article when you're done reading, because today we're celebrating the 10th anniversary of Facebook's (NASDAQ:FB) creation. The $150 billion social network is having a great birthday, as it recently reported blowout earnings and enjoyed a massive stock surge.

Ten years ago, Mark Zuckerberg was an undergraduate at Harvard who'd just hacked together a social network out of the ruins of a photo-rating site called Facemash, which had been so popular that it overwhelmed the university's network. Today, he's worth about $31 billion. Not bad for a decade of work, wouldn't you say?

Click here to read more about Facebook's creation.

The next Facebook stock ... or better?
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.

The Motley Fool recommends Facebook and Michael Kors Holdings. The Motley Fool owns shares of Facebook. 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.

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