After Tuesday’s election, stocks turned downward with the Dow Jones industrial average moving to its lowest level in more than four months.
Uncertainties over the potential “fiscal cliff,” a fresh round of worries concerning European countries and less-than-impressive corporate profits in the third quarter continue to weigh on stocks in the near term.
However, investors should not let headlines chase them away from quality stocks. The election proved a reminder of the deeply partisan divide on Capitol Hill and across the country. Friday, President Barack Obama invited business and congressional leaders of both parties to the White House for a talk on avoiding the fiscal cliff.
What the politicos in Washington do next will be critical for the market, as legislators put their stamps on the tax increases and spending cuts that will take effect in the new year unless a deal to avert the increases is reached.
Most importantly, the country could slide into recession next year and unemployment could rise without a compromise. For a safety measure, I still recommend approximately 15-20 percent of equity portfolios in a short-term bond fund.
News of local firms the past few weeks:
• Yahoo Inc. (YHOO; $17.51), the digital media company, has been drawing attention since Marissa Mayer became president and CEO.
Last week Yahoo announced a deal with Wenner Media, an entertainment media company that publishes Rolling Stone, US Weekly and several other national magazines. Though Mayer is focusing on product development, she is not ignoring opportunities to overcome Yahoo’s struggles to compete with Google Inc., Microsoft Corp. and Facebook.
Yahoo recently announced better-than-expected third-quarter results with earnings up year to year, exceeding the consensus estimate by 11 cents. Gross profit margin for Yahoo is high, coming in at 78 percent.
Numerous analysts, actively watching Yahoo, continue to suggest a “Hold and Watch” status but are looking for an increase in the share price.
• Microsoft Corp. (MSFT; $28.31) sold 4 million upgrades to Windows 8 since its debut Oct. 26. That puts it ahead of the pace set by Windows 7.
CEO Steve Ballmer said, “The launch of Windows 8 is the beginning of a new era at Microsoft.”
Microsoft announced Nov. 7 that it signed patent licensing agreements with five different companies that include camcorder, digital camera and Android tablet manufacturers.
Two weeks ago Microsoft reported quarterly revenue of $16.01 billion for the quarter that ended Sept 30. Microsoft dividends pay a 3.20 percent yield, and the market value of its stock is $242.4 billion. That puts Microsoft in a position to purchase many companies. Microsoft is a long-term and short-term Buy.