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.
Idenix Pharmaceuticals (Nasdaq: IDIX )
My dislike for Tulipmania in the hepatitis C sector is well known. Many saw November's $11 billion purchase of Pharmasset (Nasdaq: VRUS ) by Gilead Sciences to gain access to Pharmasset's stage 2 clinical trial drug, PSI-7977, an oral treatment that doesn't require interferon injections and the nasty side effects that accompany them, as a huge risk. Then earlier this week, Bristol-Myers Squibb showed perhaps even more desperation by paying a 163% premium for Inhibitex (Nasdaq: INHX ) , whose leading compound, INX-189, has only cleared phase 1 clinical trials. Now Idenix has tacked on 70% in just the past two trading sessions on speculation that it could be the next takeover candidate.
I'm growing weary of these "one-upping" biotech deals in which none of the purchased companies has, in my opinion, even come close to being worth what the purchasing company has paid. With no experimental drugs currently past phase 2 clinical trials, I am seriously looking at purchasing puts on Idenix. The puts won't be cheap, but I'd be protected from losing no more than my original investment just in case another white knight swoops in and purchases Idenix as well.
Goodyear Tire & Rubber (NYSE: GT )
I never thought the time would come when I'd consider adding Goodyear to my portfolio, but no one on Wall Street seems to want to give the company any respect. Just yesterday, the stock was hammered for comments its management made about its prospects in 2012. A mixture of supply side problems tied to the floods in Thailand and soft volumes across all regions is negatively impacting the company.
Still, this isn't the same Goodyear that looked like it could be on life support during the darkest days of the auto industry just a few short years ago. This is a company that just last quarter nearly doubled its segment operating income over the year-ago period and increased per-tire revenue by 18%. In addition, Goodyear is still targeting $1.6 billion in operating income by 2013. With its shares valued at just six times forward earnings, I happen to agree with fellow Fool Travis Hoium, who proclaimed yesterday that the stock is worth the risk at these levels.
Blue Nile (Nasdaq: NILE )
I'm no stranger to making a bearish call on Blue Nile -- in fact, I've done so on multiple occasions. The problem front-and-center with Blue Nile is that it's losing its competitive advantage. Not owning much of its merchandise means it benefits from extremely low overhead costs and can undercut traditional mall retailers in order to lure customers. Unfortunately, this also means that when its input prices are rising and it's forced to pay an even higher price than its competitors for diamonds, its margins get pinched.
Yesterday's earnings warning from Tiffany claiming soft sales in the U.S., and Signet Jewelers' fiscal 2012 EPS guidance falling short of Wall Street's estimates only make it seem more likely that Blue Nile may be in for another rough quarter when it reports. This is shaping up to be a great-looking short-sell candidate.
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.
- Add Idenix Pharmaceuticals to my watchlist.
- Add Goodyear Tire & Rubber to my watchlist.
- Add Blue Nile to my watchlist.