"Tapering" Concerns Create a Buying Opportunity

Before you go, we thought you'd like these...
Before you go close icon

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Stock markets continue a slow but steady decline as investors accept the fact that the Federal Reserve will wind down its $85 billion-per-month asset purchase plan later this year. The timing is still up in the air, but the simple fact that it's coming has traders selling, pushing the Dow Jones Industrial Average and the S&P 500 down 0.26% and 0.28%, respectively, late in today's trading session.

Traders may be selling on the prospect of Fed "tapering," but long-term investors should remember that the Fed is planning to end its quantitative-easing program because the economy is becoming strong enough to stand on its own. Unemployment is improving, GDP is moving higher, and inflation is fairly low, so it's time to end a program that was supposed to be short-term from the start. The underlying reason for tapering is actually good for investors with an eye on the big picture.

Up next in today's irrational sell-offs, Disney shares are down 1.6% following a solid second-quarter report. The ever-volatile studio business saw a 2% decline in revenue due to a tough comparison to the prior-year quarter, which saw the release of mega-hit The Avengers. However, parks revenue was up 7%, and media networks were up 5%, and these are Disney's profit drivers. Results even beat expectations and the stock is down.

I think this is a great buying opportunity for an outstanding company, because the core of Disney remains strong. It has the best franchises in the movie business, and it can leverage those characters in both its studios and its media networks. The company is flying high right now, no matter what the stock is doing today.

The other interesting move today was a tie-up of American Express and Wells Fargo in the credit card business. Wells Fargo will issue cards that will be accepted on American Express' network, expanding the company's reach in a battle against Visa and Mastercard. It also gives Wells Fargo customers more options -- something the company is trying to expand as consumers demand more services. I think this is great for both companies, although both stocks are trading lower today.  

Stocks to buy and forget about
The market can be volatile on a day-to-day basis, but long-term investors need to focus on the quality of companies and their earnings in the long term. If you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

The article "Tapering" Concerns Create a Buying Opportunity originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends American Express, MasterCard, Visa, Walt Disney, and Wells Fargo. The Motley Fool owns shares of MasterCard, Walt Disney, and Wells Fargo. 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.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

People are Reading