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.
Cisco Systems (Nasdaq: CSCO )
If you don't have Cisco Systems on your radar here at $15, then you need to stop everything you're doing and add it to your watchlist, period!
Cisco Systems has been suffering from a downturn in networking spending and is reshuffling its product lineup to get in tune with the changing cloud-computing needs of today's enterprise business customers. Even as Cisco announced an additional 1,300 layoffs yesterday, on top of the 6,500 it laid off in 2011, VMware (NYSE: VMW ) said it was buying privately held Nicira for $1.26 billion. The move will add Nicira's software-defined networking technology to VMware's already impressive virtualization technology and move the company closer to stepping all over Cisco's territory. The Street loves the move for VMware but crushed Cisco on the news.
As for me, I welcome the news because it gives investors a chance to get in at a bargain-basement price on this networking giant. Although it may be a few more quarters before Cisco's cost-cutting has measurable effects on its bottom-line results, it's really hard to ignore the fact that Cisco has generated between $8.8 billion and $10.8 billion annually in free cash flow over the past five years and now pays a dividend north of 2%. Yes, thank you, and sign me up, please!
Buffalo Wild Wings (Nasdaq: BWLD )
Seriously, this chicken is kickin', and investors who were looking for a good entry point into Buffalo Wild Wings would be wise to consider today's drubbing as a prime opportunity to buy.
Buffalo Wild Wings reported second-quarter results that widely missed the mark last night. Profits for the quarter came in at $0.62, well below the $0.68 Wall Street had been looking for, as chicken wing prices continued to weigh on margins. You know how much I dislike the "blame the weather" excuse, but this is one instance where it does hold water. Corn prices, a primary feed product for chickens, have gone through the roof, which in turn has boosted chicken costs. Buffalo Wild Wings has attempted to refrain from raising prices on its menus too much as consumer spending is still fragile. Factor in the company's aggressive expansion plans and you have all the reasons behind today's drop.
But let's not forget that this restaurant chain has a truly loyal base of customers. It probably could raise its prices and not lose too many customers to attrition. Also, Buffalo Wild Wings has a cash-rich balance sheet and has done a marvelous job of selecting locations for its restaurants. Considering that football season is right around the corner, Buffalo Wild Wings' bread-and-butter quarter, I'd have to say that this anomalously warm weather makes for a great entry into this historically outperforming casual dining restaurant.
Digital Generation (Nasdaq: DGIT )
Did somebody say "buyout"? That's what has shareholders of Digital Generation, a provider of digital delivery technologies that acts as an intermediary between advertisers and broadcast media, so excited.
To say that the advertising environment is difficult right now might be understating things by just a smidge. Macroeconomic weakness has caused many companies to refrain from large marketing budgets, which has constrained Digital Generation's results. However, news surfaced last week that Extreme Reach, a privately held rival of Digital Generation, had approached the company with a buyout offer that was north of $20 last month. Although DG has little interest in that particular offer, speculation remains that either Google (Nasdaq: GOOG ) or Yahoo! might be interested in pursuing the company. Antitrust issues with regard to ad delivery could be Google's biggest obstacle to acquiring DG, while Yahoo!, which is desperately in need of growth avenues, may opt to pass with a new CEO just coming on board.
Either way, it appears that DG is finally getting the hint to do what's in the best interests of its shareholders and should be a company worth watching over the coming months.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below, and consider following my cue by using these links to add these companies to your free personalized Watchlist to keep up on the latest news with each company:
- Add Cisco Systems to My Watchlist.
- Add Buffalo Wild Wings to My Watchlist.
- Add Digital Generation to My Watchlist.
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