Syria Takes Down the Dow, but Should Conflict Alter Your Investments?
Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.
Stocks have taken a jolting turn lower today, and as of 2:30 p.m. EDT the Dow Jones Industrial Average is down about 160 points, with only a few stocks on the blue-chip index managing to keep their heads above water. Instability's on the rise as comments from Washington have sparked fears of a U.S. intervention in Syria, adding a new blend of political turmoil into a mix that already included worries about quantitative easing. Should you be concerned for your portfolio?
Syria heats up
A U.S.-led coalition intervention in the Middle East certainly isn't something investors could prepare for. While the prospect of a wider Syrian conflict is troubling for political and economic reasons, such instability won't directly affect the majority of stocks on the markets. Expect market instability aplenty to come from the developing situation -- especially if the Department of Defense carries through on today's warning and launches a strike as soon as Thursday, as it told reporters -- but this shouldn't seriously alter your investment strategy. As with all volatile events, the smart investors will look down the road and ride out the short-term storm.
The defense sector could see a meaningful impact from a wider Syrian conflict, but the uncertainty of how the events will play out means that you shouldn't base your investing decisions on this alone. United Technologies isn't benefiting today: The defense and industrial conglomerate's shares are down 2.2% to rank among the Dow's leading laggards.
UTC's best options in the defense sector are long-term plays. The company's Pratt & Whitney subsidiary has thrived on the construction of military jet engines as the Pentagon pours money into the fifth-generation F-35 project. The subsidiary accounted for more than a quarter of UTC's total revenue from military engines last year -- a $4 billion sum that could grow as the F-35 project ramps up. Costs are also falling, and while investors should be concerned about the DoD's cash-strapped budget potentially slashing some F-35 orders, UTC yesterday finalized another $1 billion for F-35 engines.
Diversity's the name of the game for a large conglomerate like UTC, so even if defense cuts impact Pratt & Whitney and helicopter-manufacturing subsidiary Sikorsky, the company won't be hurting as much as more concentrated defense-contractor rivals.
Outside the defense sector, Chevron's among the only Dow stocks making any headway today: The oil giant's shares are up about 0.2%. Chevron agreed to sell its retail network in Egypt to French competitor Total in a deal announced by the latter today. With more than 1.4 million tons of annual sales in a network consisting of 66 service stations and other assorted infrastructure, it's a big move for Total as it looks to develop its reach outside of Europe.
For Chevron and its investors, it's a safe move. The Egyptian government announced recently that it's having a hard time paying foreign oil firms operating in the country, and the nation's civil turmoil could extend for some time. While Chevron might lose its infrastructure in the nation for the long term, it's a way for the company to scrap an uncertain business and pursue more lucrative opportunities.
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The article Syria Takes Down the Dow, but Should Conflict Alter Your Investments? originally appeared on Fool.com.Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Chevron and Total SA. (ADR). 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.
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