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 the time came 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.
Pandora Media (NYSE: P )
Can a business model be broken if it was never viable in the first place? That's perhaps the only question left to answer after Pandora Media chalked up another quarter of strong revenue, advertising, and subscriber growth but reported yet another widening loss.
In its fiscal 2013 first quarter, Pandora noted that ad sales grew 62%, while listening hours of its stations increased a dramatic 92% -- yet it still lost an adjusted $0.09 per share. The same issues that continue to plague Pandora have been present for many quarters. The company is heavily reliant on advertising growth to drive its business. As we all remember from the Internet bubble of 2000, advertising spending goes hand in hand with the health of the economy -- and last I checked, the U.S. economy wasn't exactly burning up the road. There's also that little bit about how it's going to keep it costs down while digital-content costs keep rising. You can't sell more ad space if the market for it just isn't there.
I could be wrong, and Pandora could become as successful as Sirius XM (Nasdaq: SIRI ) . But it took Sirius the better part of a decade to get its costs under control and better understand how its customer base would react to pricing changes. Frankly, I'm more inclined to think Pandora is a boat in the middle of the ocean without a motor.
Ralcorp Holdings (NYSE: RAH )
That thumping noise you hear when you walk by Ralcorp's corporate headquarters in St. Louis, Mo., is the sound of corporate executives kicking each other in the behind for not accepting ConAgra Foods' (NYSE: CAG ) $94-per-share buyout offer last year. That offer had actually been raised twice from a starting point of $82.
Since Ralcorp turned down the takeover bid, shares have taken a hit. And although much of the price decline came from the spin-off of cereal business Post Holdings, the shares have lost another $10 since the spin-off, and many of the company's business segments have hit the reverse button. Excluding the acquisition of the refrigerated dough business from Sara Lee, sales for the recently ended quarter rose 7% due to price hikes, but sales volumes fell 4%. Each business segment saw contracting volume, with cereals the lone bright spot. However, rapidly rising raw-material costs are eating up any gains being seen by the aforementioned price hikes. To top it off, these results came after the company delayed its earnings report not once, but twice in May! Nice going, Ralcorp!
Bank of Montreal (NYSE: BMO )
I find it amazing that with European banking woes in the forefront of investors' minds and our own U.S. banks making questionable investing decisions, we somehow forget about our conservatively run banks to the north -- particularly Bank of Montreal.
Canada's No. 4 bank by assets reported another solid quarter last week, which highlighted a 27% jump in income (mostly due to its acquisition of Marshall & Isley) and a significant decrease in credit-related loan loss provisions. While not everything was perfect, it was a solid quarter that ended with the bank reporting a Basel II Tier-1 capital ratio of 12% -- healthy and well-capitalized, by my standards. Low interest rates and volatile markets aren't providing banks the best environment to make money, but Bank of Montreal is doing a great job in my opinion. With the stock now yielding more than 5%, it could be worth a serious look.
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 Pandora Media to My Watchlist.
- Add Ralcorp Holdings to My Watchlist.
- Add Bank of Montreal to My Watchlist.
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