I follow quite a lot of companies -- some more closely 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.
Cobalt International Energy (NYSE: CIE )
In a true case of you pat my back and I'll pat yours, Goldman Sachs (NYSE: GS ) upgraded Cobalt International Energy last week following Cobalt's securing of oil drilling contracts off the coast of Angola. My problem with this upgrade is twofold.
First, Cobalt has yet to produce anything in the way of real results. Still entirely in the exploratory stages of its existence yet sporting a market cap north of $6.5 billion, Cobalt has racked up an outflow of more than $1 billion in free cash flow since 2007 while posting absolutely no revenue. Until I can see actual results, I see little reason for the stock to be anywhere close to this valuation.
Secondly, Goldman Sachs holds a vested interest in Cobalt's stock. It's always nice when you can, as a brokerage firm that owns roughly 20% of a company's outstanding shares, take it upon yourself to upgrade a stock currently sitting in your portfolio (that's sarcasm by the way). Investors are seeing prime rib here and all I see is a puffed-up marshmallow. That could be the leftovers of my Christmas dinner talking but I'm inclined to keep my eye on shorting Cobalt if it heads much higher given its lack of real results.
iShares Silver Trust (AMEX: SLV )
Although I still consider individual silver miners Silver Wheaton (NYSE: SLW ) and Pan American Silver (Nasdaq: PAAS ) as the best ways to play the boom in silver, I'm beginning to get intrigued with the idea of owning silver itself in the form of the iShares Silver Trust.
I'm not purposely trying to over-lever myself to the metals sector, but relative to gold, silver has considerably more practical applications and it's simply cheaper than gold from a psychological perspective. Also, silver miners are trading at much lower forward multiples than their gold mining counterparts. As long as silver's upward trendline holds around $27, I think silver could make for a solid hedge against what I anticipate will be a weaker dollar. I'm keeping my eye out for an entry point around $27.
Dendreon (Nasdaq: DNDN )
It's a biotech, so here comes the negativity, right? Wrong! I'm beginning to think that Mr. Market may have overreacted to Dendreon's countless woes of late and may be giving the company a poor rap.
Recently, Dendreon entered into an agreement with CPP Investment Board to sell its royalty rights to Merck's (NYSE: MRK ) hepatitis-C drug, Victrelis, for $125 million. This should help shore up Dendreon's balance sheet as it continues to temper sales expectations for its blockbuster prostate cancer drug Provenge. In addition, the company announced layoffs totaling approximately one-quarter of its workforce. Although I can't say I'm a huge fan of saving money via layoffs, I do see a bright future for Provenge if the company can survive these initial stage hiccups. I'm not ready to pull the trigger yet, but the company is well on my buy radar now.
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.