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.
TC Pipelines (NYSE: TCP )
There are quite a number of ways you can play the energy sector in 2013, as I detailed yesterday, but very few seem as safe and attractive over the long term from an income-seeker's standpoint as investing in midstream pipeline companies that handle the transportation and storage of oil and gas. With big recent discoveries in the U.S. of natural gas deposits, money to expand our nations' storage tanks and pipelines can't be thrown at the sector quickly enough. That's where a company like TC Pipelines comes into play.
In TC Pipelines' latest quarter, the midstream company noted a slight decline in earnings primarily attributed to weak pricing from its Great Lakes pipeline due to warmer weather and lower natural gas storage levels. Historically, though, this was an oddball year for weather, and midstream companies like TC Pipelines should be raking in profits for years to come. Let's also not forget that pipeline costs are almost entirely up-front, leaving very few maintenance costs over the next two decades of operation. With a yield near 8%, TC Pipeline is an income investors' Christmas gift come true.
LeapFrog Enterprises (NYSE: LF )
If there's anything I've learned over my years of following retailers, it's that people have very few limits when it comes to spending for their pets or their children. That's why I feel LeapFrog Enterprises, the company behind the $100 LeapPad educational tablet for kids, could be a steal of a deal this Christmas.
One of LeapFrog's biggest challenges throughout the years had been its business cyclicality. The LeapPad is a cyclically independent product that's going to help push this company beyond just its traditional retail business. LeapFrog's management also has plans to transform the next-generation LeapPad 2 from just a learning tablet to an almost iPad-like device through which children (and their parents) can download educational apps, providing an even greater source of revenue for LeapFrog and locking in customers for life.
As the Fool's Rich Duprey notes, LeapFrog isn't without its own set of challenges as Toys R Us' Tabeo tablet has crept into the marketplace, powered by Google's (NASDAQ: GOOG ) Android operating system. But as Rich also opines, the simple fact that the Tabeo has Internet access is one reason enough why parents may shun the tablet in favor of the LeapPad 2. With an expected five-year growth rate of 20% and a forward P/E of less than 10, I have to think there's a good chance for a big run in LeapFrog in 2013.
Rigel Pharmaceuticals (NASDAQ: RIGL )
Last week would have been the perfect time for Rigel Pharmaceuticals shareholders to have pulled an ostrich and dug their heads into the sand. The company's lead experimental drug, fostamatinib, for the treatment of rheumatoid arthritis, which it's licensed to AstraZeneca (NYSE: AZN ) , failed to outperform Abbott Laboratories' (NYSE: ABT ) Humira in mid-stage trials. Tested in three dosing regimens, fostamatinib demonstrated early outperformance versus the placebo in two of the three dosings, but failed to demonstrate non-inferiority relative to the placebo.
AstraZeneca was quick to denounce this as a clinical death of fostamatinib, claiming that a larger clinical trial in late-stage trials would go a long way toward determining the rheumatoid arthritis drugs' efficacy. As for me, I'm not nearly as hopeful for Rigel.
Beyond fostamatinib, it has only two mid-stage trials currently under way and one additional early stage trial. In layman's terms, losses are going to continue for a while and Rigel is burning in the neighborhood of $80 million in cash each year, giving it enough cash to make it through 2014. Still, I could easily see Rigel dipping to $4 or perhaps even lower if the sugarcoating from AstraZeneca leads to more tepid results from fostamatinib in late-stage trials. This is a company I'd definitely consider betting against on any significant rally.
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 TC Pipelines to My Watchlist.
- Add LeapFrog Enterprises to My Watchlist.
- Add Rigel Pharmaceuticals to My Watchlist.
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