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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.
Modine Manufacturing (NYSE: MOD )
If the name sounds familiar, that's because I highlighted the company as a stock near its 52-week low worth buying two months ago. As happens from time to time, I've been dead wrong, and Modine has headed even lower since my CAPScall of outperform. But rather than scurry for the hills, I feel it's worth noting what an even better value the stock has become.
Modine, a manufacturer of radiators and thermal management components for trucks, automobiles, and industrial vehicles, sees earnings weakness throughout the remainder of the year due to weakness in European demand, currency loss translation, and an inventory wind-down in Asia. But keep in mind that two of these three are very short-term in nature. Modine has little control over currency translations, so it's tough to fault it for that, and growth in Asia is still robust, so an oversupply in the construction sector should be quickly worked through. Based on its EPS forecast in February for 2012, Modine is now valued at just nine times 2012's earnings and six times 2013's. To me, that seems like an amazing bargain.
Alexion Pharmaceuticals (Nasdaq: ALXN )
To quote a famous line from Ralph Kramden on The Honeymooners, "Pow, to the moon!" OK, so Alexion is no Alice, but wow, has it taken off despite having just one drug approved by the Food and Drug Administration.
The company's only marketed drug, Soliris, treats paroxysmal nocturnal hemoglobinuria, which leads to a breakdown of red blood cells and eventually anemia. Soliris has single-handedly propelled Alexion to a valuation of $16 billion! The great thing about rare disease medications is that they rarely have any competition, as Soliris will have no major competitors for at least the next three years. But can just over $1 billion in sales from one drug support a $16 billion valuation? I'm not so sure.
Alexion does have five therapeutic studies it is currently working on, but unsurprisingly, these also predominantly involve the use of Soliris in combination with another drug. Alexion's reliance on one drug is downright scary and makes me fear what could happen if it even has the slightest hiccup.
AU Optronics (NYSE: AUO )
I know what you're thinking: "AU Optronics is near a 52-week low... he's probably going to say 'Buy it!'" Wrong! AU Optronics reported another quarterly stinker three weeks ago, and I'm seriously questioning if the company will survive over the long run.
AU Optronics, which makes LCD and flat-panel displays for everything from mobile devices to televisions, has struggled due to weak panel pricing and erratic demand. But this weakness isn't just limited to AU Optronics -- it's a sectorwide problem. LG Display (NYSE: LPL ) noted in its most recent quarter that while prices were more or less stable, shipment delays exacerbated its losses. Sony (NYSE: SNE ) , one of the premier television manufacturers, has lost money from its television segment for eight straight years. With weakness like this, you don't need enemies -- you need a better place to put your money.
AU Optronics has taken steps to improve its cost-efficiency and the company is optimistic that a new line of flat-panel products will boost sales, but I've learned to believe it when I see with this sector.
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.
- Add Modine Manufacturing to My Watchlist.
- Add Alexion Pharmaceuticals to My Watchlist.
- Add AU Optronics to My Watchlist.
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