Why the Dow Popped Today
The Dow Jones Industrial Average (INDEX: DJI) didn't amaze any investors this week, closing down 0.9% over the last five trading days, but at least it's not as bad as it could have been; the index popped 0.7% today.
The reason for the late enthusiasm stems from Federal Reserve Chairman Ben Bernanke's comforting comment: "There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery." Markets have been sideways lately as investors have waited for a sign of additional action, preferably in the form of quantitative easing from the Fed. While the market seems to think this is such a sign, I don't see the same reason to cheer here. This sounds like more of the same vagueness from the Fed without any concrete indication.
And with rates so low already, the Fed seems to be running out of effective bullets. With regard to quantitative easing, each additional injection from the Fed will be less effective than ones prior, and the track record from alternative approaches like Operation Twist isn't stellar.
I view this as a non-event really. Frankly, our investment decisions shouldn't be hung on whether or not the Fed takes additional action or not. Buying great companies with winning models is the only real approach to building long-term wealth. Those companies will rise above market noise and perform whether Bernanke drops one bag of money or 100 out of his helicopter.
One such company is Crocs (NAS: CROX) , a company I've recommended for a while now. Shares were up 8.2% today, but are still a huge bargain even after the pop. Crocs has supercharged growth from emerging markets, industry-leading margins, and virtually no debt. This company is far more than the infamous clogs that made them famous. It has reduced its reliance on the product, which now comprises 46% of volume, and added a more diversified portfolio. One long-term nagging concern is the looming threat of a repatriation tax should Crocs ever want to bring some money home, but given that Asia and Europe is where the company is adding all its locations, I don't see this being a problem for a long time.
The flip side of that pop today are veteran tech companies like Hewlett-Packard (NYS: HPQ) and Dell (NAS: DELL) , both of which took a serious drubbing this week on poor PC sales. These former titans of the tech space have been unable to effectively transition to the changing landscape of tablets and mobile computing, and have been left in the dust as companies like Apple (NAS: AAPL) have eaten their lunch.
That trend won't be changing anytime soon, either. Apple recently became the world's largest company, and is showing no signs of slowing down. While some may be apprehensive about buying a company that's grown so big, so fast, Apple still has compelling growth ahead of it. HP and Dell may look cheaper on paper, and they are -- for a reason.
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The article Why the Dow Popped Today originally appeared on Fool.com.Austin Smith owns shares of Apple. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and Crocs. Motley Fool newsletter services have also recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
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