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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.
Kulicke & Soffa (NASDAQ: KLIC )
Despite having a name that for some reason makes me think of a mattress company, Kulicke & Soffa, a maker of equipment and packaging used to produce semiconductors, is a veritable cash cow that should be on your watchlist.
The company is understandably undervalued because semiconductor equipment companies are often bound to the natural ebb and flow of the tech cycle. When Intel (NASDAQ: INTC ) reduced its 2012 capital expenditure forecast to a range of $11 billion to $11.6 billion, or roughly $1 billion below its previous estimations just a few months prior, it cued investors in to a tepid semiconductor spending environment. However, I've learned that when things are at their bleakest in the semiconductor equipment space, it's the perfect time to consider buying.
Kulicke & Soffa boasts an incredible $440 million in cash with no debt, meaning nearly half of its current value is based on just its cash balance alone. Furthermore, Kulicke & Soffa has averaged $145 million in free cash flow over the past three years -- thus why I call it a cash cow. With an expected surge in tech spending over the first half of 2013 now that the fiscal cliff deal is behind us and businesses have better clarity, Kulicke & Soffa could head much higher.
DuPont (NYSE: DD )
That's right; I've got my eyes on chemical and agricultural giant DuPont!
DuPont's operations are very cyclical and probably more heavily dependent on the ebb-and-flow nature of the global economy than Kulicke & Soffa. Simply put, its bottom line is likely to get worse before it gets better. DuPont is taking proactive steps now, like eliminating 1,500 jobs, in order to reduce expenses and maintain profitability, but the big question mark remains how well China's economy will respond to a recently enacted $156 billion infrastructure plan.
For DuPont to succeed, it'll need China's GDP to begin heading back in the correct direction again, and it'll need demand for titanium dioxide, a pigment often used in paint, to pick up significantly. From a domestic standpoint, a stabilizing housing environment bodes well for increased titanium dioxide sales, but it'll need titanium dioxide pricing to work in its favor as well as a rebound in emerging markets, specifically China, to really kick-start its growth engine.
DuPont is also shifting its focus toward agriculture in 2013 and will focus on an area of the market less susceptible to a global slowdown: crops. Fertilizer maker Mosaic's (NYSE: MOS ) whopping 500% boost in semiannual payouts last year signifies to me that the intermediate commodity view is relatively stable, which should bode well for DuPont.
For now, though, I'm merely watching DuPont, but anything below $40 would really entice me.
Globus Medical (NYSE: GMED )
This is one of those stocks that you'd have to show some backbone to buy at the moment, because it's in absolute free fall since reporting third-quarter results in November. Whether you realize yet or not, I just made a funny, because Globus Medical is a manufacturer of spinal implant devices. What's not funny is just how difficult the spending environment in spinal implants has been in recent months -- specifically overseas -- yet Globus Medical keeps trudging forward.
Globus' third-quarter report highlighted a 12% increase in revenue, produced almost entirely from organic growth, with a 38% increase in international sales. A big investment in Globus' pain management division, Algea Therapies, sent investors running for the hills, but it appears investors may simply be overreacting to a minor earnings miss. Globus is introducing new products at a very rapid rate, expanding nicely overseas, and boasts $195.2 million in cash with no debt on its balance sheet. Other than the recently enacted medical device excise tax, I'd say that everything seems to be working in Globus' favor.
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 Kulicke & Soffa to My Watchlist.
- Add DuPont to My Watchlist.
- Add Globus Medical to My Watchlist.
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