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I follow quite a lot of companies, 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, I'd be lost when it came time to choose which stock I'm buying or shorting next.
Today is "Watchlist Wednesday," so I'm discussing 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.
Big Lots (NYSE: BIG )
It's all coming back to me now -- namely, why I avoided the stock for so many years. After earlier predicting that it would grow same-store sales by 2% to 4%, Big Lots warned this week that it would instead be posting a same-store sales decline thanks to weaker-than-expected sales of electronics.
The news is disappointing because many of its rivals have been struggling, and Big Lots has once again proven unable to capitalize on others' weakness. Sears Holdings (Nasdaq: SHLD ) announced it would be closing more than 160 of its Sears and Kmart locations as it attempts to divert a cash crunch, while electronic big-box store Best Buy (NYSE: BBY ) stated that it would be closing 50 larger locations in favor of opening 100 smaller stores because of declines in customer traffic and television sales.
Big Lots has been relying on cost-conscious consumers to drive sales, but evidence has emerged lately that consumers are beginning to trade up to discretionary items -- potentially bad news for a discount retailer like Big Lots. I still remain bullish on the company's long-term outlook, but Big Lots has plenty to prove over the near term.
Kronos Worldwide (NYSE: KRO )
You may not think there's money to be made in the titanium dioxide pigment market (essentially what's used to turn everything from paint to toothpaste white), but Kronos Worldwide shareholders would tell you otherwise.
The titanium dioxide market is benefiting from high demand, which has outpaced supply over recent years. The good news for Kronos, as well as the world's leading manufacturer of titanium dioxide, DuPont, is that this increase in demand gives them huge pricing power. In Kronos' latest quarter, the average selling price to customers was a full 11% higher than in the year prior. Not surprisingly, in its most recent quarter Kronos reported more than doubling its net income to $0.74 from $0.33 last year. With little new supply on the way, it appears titanium dioxide manufacturers should remain in control of pricing for at least the next few years, which bodes well for Kronos' prospects.
Polycom (Nasdaq: PLCM )
Just three weeks ago, we were told by video-conferencing specialist Polycom that its results weren't going to be up to snuff. Last week we got the actual results. To me, they didn't seem nearly as bad as everyone had predicted.
Polycom, as it did in early April, warned that weakness in its North American market was creating near-term growth problems in its unified communications business. The company still managed to grow revenue by 2% in North America -- which comprises half of Polycom's sales -- in the first quarter. Europe, the Middle East, and Africa actually showed stellar growth, with sales jumping 16% year over year.
Although Polycom may not yet have all the answers as to why its sales are slumping, it does have an impeccable debt-free balance sheet ripe with $3.18 in cash per share. With the company trading for what I deem a reasonable 11 times forward earnings, now could be the time to start nibbling on this video-conferencing superstar.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below and consider following my cue by using the links below to add these three companies to your free personalized watchlist and keep up on the latest news with each company.
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