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I follow quite a lot of companies -- some closer than others -- so the usefulness of a watchlist to me cannot be overstated. Without my watchlist, I'd be unable to keep up on my favorite sectors and what's really moving the market. Even worse, without my watchlist, I'd be lost when it came time to choose what stock I'm buying or shorting next.
What I intend to do as an experiment is to make every Wednesday "Watchlist Wednesday," where I'll discuss three companies that have crossed my radar in the past week and at what point I may consider taking action on these calls with my own money. Keep in mind these aren't concrete buy or sell recommendations, nor do I guarantee I'll take action on the companies being discussed weekly. What I can promise is that you can follow my real-life transactions through my profile, and that I, like everyone else here at The Motley Fool, will continue to hold the integrity of our disclosure policy in the highest regard.
Green Mountain Coffee Roasters (Nasdaq: GMCR )
You know the old saying, the bigger they are, the harder they fall? No truer has this been than in the case of Green Mountain, which lost more than 35% of its value in the past few trading sessions following a less-than-impressive earnings report. For a company that has become accustomed to crushing analyst projections, revenue of $711.9 million and a profit of $0.47 isn't what the doctor ordered, with both figures falling shy of estimates. But I don't think optimists should be throwing in the towel just yet.
Green Mountain, assuming what David Einhorn opined has no merit, is now by far the cheapest coffee stock in the sector. Starbucks (Nasdaq: SBUX ) and Peet's Coffee and Tea (Nasdaq: PEET ) are valued at 20 and 32 times forward earnings respectively, while Green Mountain trades at just 14 times projected profits. The company, despite the rare earnings miss, reaffirmed guidance of $2.65 for the year and remains on pace to grow revenue by more than 60% in fiscal 2012 and more than 30% in fiscal 2013. If another sell-off occurs, I may be looking to nab some shares in the low $30s.
Panera Bread (Nasdaq: PNRA )
I'm not quite sure what they're putting in the bread there, but it must be lighter than air, looking at Panera's recent stock surge. Panera continues to defy my prediction that higher food costs and falling consumer spending budgets are going to strain margins. The company once again raised guidance in its most recently released third-quarter report and forecast renewed optimism of double-digit growth. I, however, remain skeptical.
Now valued at 25 times forward earnings, the stock is trading in rarefied territory where mistakes are simply not allowed by Wall Street. It wouldn't, in my opinion, take much of a same-store sales miss or a revenue shortfall for the company's stock to fall off a cliff. With nearly all value squeezed out of the stock, I'm tinkering with the idea of picking up puts in Panera in the future.
Jazz Pharmaceuticals (Nasdaq: JAZZ )
It's rare when I can find a biotechnology company I will gladly put two thumbs-up behind, but Jazz Pharmaceuticals is it. If you recall, Jazz Pharmaceuticals was the very first mid cap I listed in my series "10 Mid Caps to Rule Them All," because of its impressive drug growth and minimal competition. Based on its third-quarter results, nothing has changed, save for its stock price getting cheaper.
For the quarter, Jazz noted a 64% jump in sales primarily due to a 68% jump in sales of its blockbuster narcolepsy drug, Xyrem. Sales of Luvox, the company's obsessive compulsive disorder and social anxiety drug, also rose 46%. Jazz raised its revenue and profit guidance from its own previous guidance. So, if you asked me again if investors are undervaluing Jazz, I'd say resoundingly, "Yes!" I may be looking at picking up shares in the future.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below and consider taking my cue by adding these three companies to your free and personalized watchlist to keep up on the latest news with each company.