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.
Integrated Silicon Solutions (NASDAQ: ISSI )
It's time to take a look at a longtime favorite of mine in Integrated Silicon Solutions, a fabless semiconductor company providing integrated circuitry to the automotive, communications, and medical industries.
Normally the time to sell integrated circuit makers is when things are going perfectly, and you buy them when they're losing money and investors want nothing to do with them. For ISS, we're somewhere in between pure avoidance and everything going great.
In ISS's most recent quarter it delivered a 20% increase in revenue, meeting the high-end of its previous forecast, with automotive revenue providing the biggest boost, up 44% over the year-ago period. As new cars continue to become more hi-tech, ISS is going to reap the rewards. In addition, electronic costs generally fall over time, meaning these conveniences are being found in even cheaper and smaller vehicles, giving ISS a broader market audience.
ISS is also very well capitalized. It ended the first-quarter with $111.4 million in cash, or nearly $4 per share. The company tends to be very conservative with its cash, banking it for a rainy day and living off of it during recessionary times. However, having followed this company for the better part of a decade, I'm of the opinion that it could pay out a 1%-2% yield without too much difficulty.
You have to understand that this is a cyclical company and not a stock you'd hold for the next decade, but I do, once again, like its prospects over the next 12 to 24 months.
Chesapeake Granite Wash Trust (NYSE: CHKR )
There's absolutely no sugarcoating that it's been a miserable past year for royalty trusts. A former holding of mine, BP Prudhoe Bay Royalty Trust (NYSE: BPT ) , was creamed after multiple sources questioned whether the trust's share price was grossly overvalued based on the finite future of its dividend payments. In short, BP Prudhoe Bay would need oil prices to rise drastically to make up the difference of its relatively fixed oil-equivalent production.
For Chesapeake Granite Wash Trust, it's been a far different story. Yes, the distributions that shareholders are receiving have come in below expectations on a disturbingly regular basis, but it's been more an effect of lower natural gas production and realized prices. The appeal of Chesapeake Granite, which boasts considerably more natural gas reserves than liquid reserves in the Anadarko Basin of Oklahoma, is that natural gas usage is expected to soar over the next decade.
Between 2007 and 2012, according to data from the Energy Information Administration, natural gas end-use jumped by 2.4 trillion cubic feet. While we did see a slight decline in residential and commercial usage, power generation by electric utilities spiked by 33.6%. If President Obama is serious about freeing American from its dependence on foreign oil, then tapping further into America's natural gas reserves is going to go a long way to accomplishing these goals and stabilizing natural gas prices.
Although its yield is certainly subject to change, at an annualized 18%, this is an income investors' dream stock!
Insmed (NASDAQ: INSM )
Investors are certainly getting excited about the opportunity surrounding Insmed's leading drug candidate, Arikace, for non-tuberculosis mycobacterial infections.
However, I would like to take this time to remind investors that in all of Insmed's years as a publicly traded company it has never turned a profit, nor does it have an a drug currently approved by the Food and Drug Administration. Insmed has churned $223 million in negative operating cash flow over the past decade while spitting out a mid-stage failure for Iplex, its experimental myotonic muscular dystrophy drug, in 2009.
Another factor worth considering is that Arikace, no matter how exciting the recent data has been, is still many years away from being approved. Insmed still needs to run late-stage trials in two of its three ongoing Arikace trials and may not see the light of day until 2015. The FDA is also particularly stringent when it comes to the approval of inhalable devices.
Insmed simply has a history of disappointing investors and I don't see this changing anytime soon. I would be looking at potential short-sale opportunities in Insmed.
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 Integrated Silicon Solutions to My Watchlist.
- Add Chesapeake Granite Wash Trust to My Watchlist.
- Add Insmed to My Watchlist.