3 Stocks to Get on Your Watchlist

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

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. 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.

Yingli Green Energy (NYSE: YGE  )
Make no mistake about it: You could probably throw a dart at any one of the highflying solar companies and hit gold as a short-seller over the next six months. Solar companies like Yingli Green Energy are flying high after U.S.-based First Solar (NASDAQ: FSLR  ) finally found the "on" switch in recent months, combining the need for large projects in the U.S. with lower operating costs and stabilizing solar panel prices. Unfortunately for China-based Yingli and many of its peers, First Solar's success has absolutely no benefit to them.

Yingli's big boost yesterday came from a production guidance update that now calls for shipments to drop by 6%-7% in the upcoming quarter from the fourth quarter compared with its previous forecast of a low- to mid-double-digit percentage drop in shipments. While certainly good news, the company didn't budge its gross margin forecast from an already razor thin level of 4%-4.2%. To me this is a clear signal that demand may be improving, but that pricing is weak and there's probably still abundant solar panel supply in China.

Another factor to consider here is that Chinese solar panel makers are going to have a nearly impossible time competing with American solar producers. In a turn of the tables, the United States' tariffs on solar panels are providing more than ample protection for U.S.-based companies like First Solar to market their more efficient panels without worrying about price competition from China-based companies like Yingli. We're seeing businesses and governments choosing efficiency over rock-bottom prices this year, and that trend bodes poorly for the entire Chinese solar industry.

Sony (NYSE: SNE  )
While we're on the subject of potential short-sale opportunities, how can I forget to mention Sony, which has shot dramatically higher over the past two weeks despite a dismal streak that includes eight straight years of losses for its television segment.

Sony's boost has come from two fronts. First, gaming companies are showing signs of life, with new gaming consoles set to debut in the second half of this year -- including the new PlayStation 4. This is shaping up to be one of those "buy the rumor, sell the news" type of events, because console makers are still hostage to an incredibly commoditized business platform.

The other factor sending Sony higher is a proposal offered by activist hedge fund manager Daniel Loeb of Third Point, which outlines a plan to spin off the company's software and entertainment business. While spinoffs are good in that they can help unlock shareholder value by making revenue and earnings visibility easier for investors to understand, I'd be leery of any value creation here, given how dismal TVs have performed and how commoditized the remaining shell of the company would be once the software and entertainment division are spun off.

The truth of the matter is that Sony is in trouble. It's lost nearly all of its competitive advantages, and it's even losing its brand identity. With further losses expected this year, it's a name I'd consider betting against.

Perfect World (UNKNOWN: PWRD.DL  )
Sticking with our overseas theme today, Perfect World, a China-based gaming company, looks like it could be ready to make a big move, and it certainly looks like the proper way to play the excitement surrounding the gaming industry.

One reason Perfect World makes sense is the simple fact that China's middle class is relatively new to simple luxuries like being able to purchase and play video games on their consoles or PCs. Because there's still such a large opportunity in China for both middle-class income growth and gaming penetration, the same commoditization concerns that exist in the U.S. really aren't present in the gaming industry in China. This means Perfect World will continue to boast good pricing power and should be able to deliver steady results moving forward.

Another factor to consider is the company's immaculate balance sheet, which boasts close to $250 million in net cash (more than $5 per share). This cash on hand, in addition to the $145 million in free cash flow the company has averaged over the past four years, allows it to focus on R&D without the need to take on any additional debt.

This isn't to say that the gaming industry isn't without its own set of hiccups. However, Perfect World -- and its yield, which is nearing 4% -- looks like a darn good value at these levels, considering the growing promise of gaming in China.

Foolish roundup
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:

Will this solar stock stay bright?
Investors and bystanders alike have been shocked by First Solar's precipitous drop over the past two years. The stakes have never been higher for the company: Is it done for good, or ready for a rebound? If you're looking for continuing updates and guidance on the company whenever news breaks, The Motley Fool has created a brand-new report that details every must know side of this stock. To get started, simply click here now.

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2447951, ~/Articles/ArticleHandler.aspx, 9/27/2016 8:04:32 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,228.30 133.47 0.74%
S&P 500 2,159.93 13.83 0.64%
NASD 5,305.71 48.22 0.92%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/31/1969 7:00 PM
PWRD.DL $0.00 Down +0.00 +0.00%
Perfect World CAPS Rating: ***
SNE $33.47 Up +0.01 +0.03%
Sony CAPS Rating: ***
YGE $3.83 Down -0.11 -2.79%
Yingli Green Energ… CAPS Rating: *
FSLR $39.09 Up +1.84 +4.94%
First Solar CAPS Rating: ***