Market Wrap-Up for Sept.19 (GR, SBUX, WFM, WYNN, HAL, EQR, GLD, more)

After being down for much of the session, the averages were able to bounce off the lows of the day as investors were betting that global debt scenarios could be soon priced into the averages. Gold (GLD) prices closed had a tough day and were back under the $1800 an ounce level.

Looking at the big movers today, Goodrich (GR) bucked the early selling as takeover chatter increased. It was interesting to see Starbucks (SBUX) and Whole Foods (WFM) lead the charge as the theme of higher-end consumer spending continues to stay strong. Staying under the same umbrella you can say, Wynn Resorts (WYNN) and Polo Ralph Lauren (RL) saw buying interest as well.

There were some big names on the downside as well, including Metlife (MET), Ingersoll-Rand (IR), CSX Corp (CSX), and Halliburton (HAL).

Investors Chasing REITs Too Much?

As I’ve mentioned recently, I’ve been perplexed by the continued bullishness in REITs, despite their dividend yields creeping lower and lower. A report by Citigroup Global Markets found investments in REIT funds is now at $96 Billion (including mutual funds and exchange traded funds), surpassing the prior peak of $87 billion in February 2007. We have been on the sidelines as far as recommending investors commit new money to work in REITs, but momentum money continues to pour in for stocks that are hitting new 52-week highs. If you are income-seeking investor, understand that traders are often quick to hit the exits in a hurry when a correction in REITs arrives.

It’s likely that investors and money managers are looking at REITs as an inflation hedge, but we still do not see real estate prices taking off in the foreseeable future. The area we favored the most in REITs until we moved to the sidelines was in the Apartment/Storage side. Names we liked then included AvalonBay Communities (AVB), Equity Residential (EQR), and Public Storage (PSA). We are certainly digging deep to see if earnings estimates can rise dramatically to warrant us putting the names back on our Best Dividend Stocks List. We’ll be sure to let subscribers know if that does become the case.

The Casino Mentality of the CNBC Portfolio Challenge

I cringe each year when I hear the CNBC promo for its $1 Million Portfolio Challenge. It’s essentially a day trading challenge, with no real investment characteristics whatsoever (no matter how they try to spin it). The secret to winning a contest like this? Be as reckless as possible.

The winning strategy is to buy the lowest priced stocks possible, and hope the markets follow you into broad speculative excess. The benefit to investors? Absolutely nothing. The benefit to CNBC? More people crowding around the casino table (CNBC’s network) looking for any stocks that could be moving up big on a percentage basis. The contest will even allow for participants to use $100k of their $1 million play-money portfolio in currency trades. It just so happens CNBC has a currency-focused half-hour show now that runs on late Friday afternoons. Currency trading — now there’s a real casino game if I’ve ever seen one!

All in all, the portfolio challenge is a counterproductive exercise that encourages reckless trading by folks that shouldn’t be trading to begin with. Believe it or not, people tend to make real-life investing decisions based on their “success” in the play-money game. I myself found the game negatively affected my trading results back in my trading days. Please avoid this mistake at all costs! Investing with real hard-earned money and real risk is a different ballgame altogether. That’s why I stress the value of investing long-term to build wealth with income-producing assets.

Now there’s nothing wrong with having fun with CNBC’s annual contest. Remember though, it’s just a game (and don’t say I didn’t warn you!).

Did You Miss Our Weekend Updates?

I hope everyone had a chance to check out our Dividend.com Premium members-only weekend articles, including new features that highlight some of the biggest winners and losers from the week that was, such as analyst upgrades/downgrades and earnings/story stocks. These articles are a great way to catch up on the week that was in the markets. We also have a rundown of how various Dividend ETFs performed on the week.

Thanks for reading everybody. I’ll see you tomorrow!

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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