Dow Stays Flat, But Nike, Home Depot Point to Weakness in High-Growth Stocks

Investors didn't get their record close for the Dow. Can growth stocks keep leading the bull market higher?

Apr 3, 2014 at 9:00PM
Longview

After a morning during which the Dow Jones Industrials (DJINDICES:^DJI) set a new intraday high, traders have to be disappointed with the Dow's eventual loss of about half a point, or 0.0027%, which left the venerable stock market benchmark a whopping four points below its Dec. 31 record high. Yet, despite the fact that the Dow's flat performance today suggests investors' willingness to own stocks even after a massive five-year bull run, flagging performance from growth stocks Nike (NYSE:NKE) and Home Depot (NYSE:HD) hints at fatigue among high-momentum gainers that have led the Dow and other markets higher over the years.

Nke

Source: Nike.

Nike's three-quarter percent drop is just the latest in a series of declines ever since last month's earnings report for the athletic shoe and apparel maker. As tempting as it is to blame the company's bad fortune on short-term news events like the withdrawal of endorsement partner Tiger Woods from the Masters golf tournament later this month, Nike has many investors wondering whether it can sustain its growth pace without a stronger contribution from high-potential markets like China. In its quarterly report, Nike reported a big jump in the amount of money it spent on overhead expenses, raising concerns about rising costs more broadly, and whether top-line growth can exceed the rate of increase in overhead. One key test for Nike will come this summer, as Brazil prepares for the World Cup and Nike makes its play to try to capture more of the soccer market from Adidas. If it's successful in Brazil, though, Nike's shareholders could get a big reward, as growth could pick up strongly from a rising class of new emerging-market consumers.

Meanwhile, Home Depot fell 0.7% amid mixed signs for the housing market nationally. Across the country, many states have seen prices rise far enough to exceed their past peaks from the housing boom, making some investors nervous about a newly budding housing bubble and the impact it could have on both homebuilder stocks and on related industries like Home Depot's home-improvement business. Tomorrow's employment report will play a vital role in whether Home Depot can move forward from current levels, as the retailer hits its key spring season and needs to build momentum in order to perform well. After years of finding ways to execute well and deliver growth even in sluggish housing markets, the onus is on Home Depot to find new ways to capitalize on the economic environment, no matter which way it moves.

The benefit of investing in Dow stocks is that even its growth giants don't usually have the risk levels or amount of momentum that other stocks have. As a result, even with the challenges that Nike and Home Depot face, the need for immediate kneejerk reactions among shareholders is far less than it might be if you owned lower-quality stocks in your portfolio. Nevertheless, though, the Dow will need good performance from its growth stocks if it wants to keep soaring to new record highs.

Six stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong, time, and time, and time again, with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently, one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Home Depot and Nike. The Motley Fool owns shares of Nike. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers