1 to Buy, 2 to Watch

What companies are tomorrow's big winners? In our ongoing series, I'm chatting with Fool analysts and advisors to find out the stocks they're watching and the catalysts that would signal it's time to buy. Today, Fool analyst Alex Pape shares two companies on his watchlist and one he just bought for himself. (For your convenience, you can now create your own version at MyWatchlist.com, your free customized hub to follow the performance and Fool coverage of the companies you care about.)

Two companies whose time is near
Maintenance dredging isn't optional. As silt and dirt find their way into waterways and ports, ships will eventually run aground if dredging companies don't routinely clear the way and maintain the necessary depth. The U.S. government has neglected this maintenance for nearly a decade, says Alex, and that backlog is about to become problematic. The country started to pay attention last year and activity picked up, a trend that is likely to continue.

If that were the only opportunity awaiting Great Lakes Dredge and Dock (Nasdaq: GLDD  ) , it would make the company an intriguing investment opportunity. But the nation's largest dredging company has other tailwinds, including the Panama Canal expansion project, slated for completion in 2014. Suddenly, even the largest international vessels will be able to pass through the Canal and will be looking for Gulf and East Coast places to dock. That, combined with the constant work of beach nourishment and repair from the damages wrought by coastal storms, means plenty of business for Great Lakes.

Alex's only hesitation is on the international front, where the vast majority of its work is for the Bahrain government (which accounted for 22% of dredging revenue in 2009). The market has priced in that business, which Alex views as less than stable. In his dream scenario, oil prices fall significantly, Bahrain drops its contracts, the market overreacts to the news, and he can buy the very strong and reliable remaining business at a discount.

Similarly, he would like to see Chiquita Brands (NYSE: CQB  ) trim away the part of its business portfolio that is the bruise on the banana king. The company has seen sales of its salads and other fruits fall off in recent years, giving the company's revenue a flattish or downward trend. But that masks the fact that its core business is up. Bananas accounted for nearly 60% of the company's sales last year and they've generated an average of roughly $85 million in annual operating cash flow over the past six years, Alex says. He'd love to see Chiquita drop some of its non-banana lines, hope the market takes that as a sign of weakness, and then he'll back up the banana boat.

One to promote from the watchlist
Carrying plenty of debt, unable to get anticipated refinancing because of tight markets, and facing decreased occupancy rates, this is not the optimal time to be a hotel owner ... unless you can pick them up at firesale prices. That's the approach of industry veteran Jon Bortz, who came out of retirement to create Pebblebrook Hotel Trust (NYSE: PEB  ) because he'd never before seen such deals available. Since launching the company last year, he's raised about $700 million used it to buy seven hotels in the past six months. As Alex wrote when he added Pebblebrook to his Rising Stars portfolio, "As a rare cash buyer in a debt-flooded market, Bortz has his pick of the litter."

"There may be no better value shopper than hotel pro Jon Bortz, who's running around the country scoring mouthwatering deals for his shareholders," Alex wrote. "The market, however, is running scared at the mere mention of the word 'hotel.' Today, we have the opportunity to jump on the Pebblebrook deal train for a dirt cheap price."

And that's exactly why it pays to watch. You can make smarter investing decisions with your own version of My Watchlist, new and free from the Fool. Click below to start following one of the stocks mentioned above:

•   Add Great Lakes Dredge and Dock to My Watchlist

•   Add Chiquita to My Watchlist

•   Add Pebblebrook to My Watchlist

Roger Friedman doesn't own shares of any companies mentioned, but they're all now on his watchlist. The Fool owns shares of Pebblebrook Hotel Trust . 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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