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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 see 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 that 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.
Penn West Petroleum (NYSE: PWE )
With many natural-gas drillers paring back their spending and profits coming at a premium, I have to say it's a bit odd to see Canada's Penn West Petroleum, which drills for both oil and gas, sporting a dividend yield north of 7%! That yield drew the scrutiny of my Foolish colleague, Justin Loiseau, who feels that a dividend cut may be in the company's near future.
I, however, feel that another dividend cut may be the least of shareholders' worries. Recently, Penn West cut its capital expenditures budget by $100 million to $150 million and announced its intentions to sell anywhere from $1 billion to $1.5 billion in noncore assets. The move might be undertaken to shore up its balance sheet or to keep its dividend payout well above its peers'. Then again, this also might be a signal that Penn West is in over its head and that its hedges are running out of steam.
Penn West notes in its second-quarter results that it has 60,000 million cubic feet per day of natural gas hedged at an average price of $4.30. Next year, this drops to just 52,000 mcf per day at an average price of $3.25. In short, unless natural-gas prices rebound dramatically, Penn shareholders can expect a rapid decline in operating earnings in 2013 and beyond.
Molycorp (NYSE: MCP )
Things are about to get very exciting for rare-earth miner Molycorp now that it has begun mining in Mountain Pass, Calif., at its Project Phoenix facilities. The plan for Molycorp is to have production levels hit 19,050 metric tons through the fourth quarter, with a production ramp-up leading to 40,000 metric tons processed per year going forward.
The biggest impediments to Molycorp's game plan have been the wait for the completion of Project Phoenix and a precipitous drop-off in rare-earth metal prices. For now, it appears we've alleviated that first worry, and the company should be able to drastically lower its expenses -- including energy expenses -- with renewable energy and natural gas powering its mining operations. Also, with Avalon Rare Metals (NYSE: AVL ) and Rare Element Resources (NYSE: REE ) still in the exploratory stages of their existence, it'll be at least another two to four years before they get to where Molycorp is right now. The question that remains is whether China will step up to the plate and demand as much rare-earth metal as it has in recent years.
Glu Mobile (Nasdaq: GLUU )
With the launch of the next-generation Apple iPhone right around the corner and expectations from Wall Street analysts -- and the Fool's own Evan Niu -- ranging from bullish to practically off-the-charts bullish, companies that make their living creating mobile-based games could soon be in high demand. Glu Mobile looks like it could be one of those exciting growth stories.
Glu is projected to grow by 30% each year over the next five years and has crushed the Street's EPS expectations in each of the past four quarters. Although Glu is still unprofitable, its total revenue shot up by 35% in the second quarter, and non-GAAP margins rose to an impressive 91%. Like the rest of the mobile-gaming industry, Glu will face intense competition, but the possibility that tens of millions of smartphones are about to hit the market over the remainder of 2012 is a tall drink of optimism for shareholders. It's a stock that bears watching.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below and consider following my cue by adding these companies to your free, personalized watchlist to keep up with the latest news on each company:
- Add Penn West Petroleum to My Watchlist.
- Add Molycorp to My Watchlist.
- Add Glu Mobile to My Watchlist.
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