Tuesday, June 11, 2013

Looking for Winners? The Dow Had None Today

It's pretty rare when every single component of the Dow Jones Industrials (DJINDICES: ^DJI  ) drops in unison, but when it happens, it usually results from a broad-reaching macroeconomic event. The catalyst for today's 217-point drop in the average was worry about the impact of a tapering of Federal Reserve bond-buying that looks increasingly likely to take place in the near future. A lot will hinge on Friday's reading on the employment front, but in many ways, investors are in a no-win situation. If Friday's jobs number is strong, it will support calls for reducing quantitative easing activity, but a weak number will simply call into question the effectiveness of the entire strategy the Fed has followed for years.

The best the Dow could come up with today was a 0.2% decline for Cisco Systems (NASDAQ: CSCO  ) . Oddly enough, the tech giant has become one of the prime examples of the reversal of thinking among investors of what constitutes growth and value stocks. Cisco has gone from paying no dividend as recently as the beginning of 2011 to offering a nearly 3% yield, and its modest valuation makes shares look like a bargain. Although investors remain nervous about the company's ability to defend its networking turf while expanding into other lucrative areas of information technology, Cisco nevertheless is exhibiting characteristics you'd expect from more traditional defensive stocks.

Johnson & Johnson (NYSE: JNJ  ) , which is one of those defensive stalwarts, also managed to limit its losses, falling about 0.5%. In the latest of a series of recalls over the past several years, J&J voluntarily recalled its Cilest birth-control drug, which the company sells outside the U.S. in areas including Latin America, Europe, and Asia. The recall involved concerns about a failure of one of the drug's active ingredients to pass an internal quality-control test. J&J assured users that the pill is safe, but perceptions of quality control have plagued the company lately, and this latest episode does little to reassure investors that J&J has solved the fundamental problems that have led to so many recalls recently.

Finally, beyond the Dow, a few winners did manage to gain ground. ITT Educational Services (NYSE: ESI  ) was one of the biggest, picking up more than 8%. Defying negative perception of the for-profit education industry, ITT has been buying back its stock, and today's gains reflect increasing confidence that the educator will survive its controversies over the past several years. Most of ITT's peers lost ground on the day, suggesting that investors truly value the confidence that big stock buybacks offer.

Once a high-flying tech darling, Cisco is now on the radar of value-oriented dividend lovers. Get the low down on the routing juggernaut in The Motley Fool's premium report. Click here now to get started.

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