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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. 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.
McDonald's (NYSE: MCD )
Chances are, I'm not setting off lightbulbs above your head by telling you that you should be following McDonald's every move since it's the pillar of the restaurant sector. However, following its second-quarter report on Monday, I think we have all the more reason to believe that McDonald's is losing its luster.
Based on brand value, McDonald's image and name alone should be enough to drive sales. It has bountiful content and movie partnerships and revolutionized the way consumers think about fast food by introducing healthier eating options roughly a decade ago. But its days of being at the forefront of the innovative curve may be coming to an end.
McDonald's quarterly report pointed to some very serious concerns with U.S. same-store sales rising by just 1% despite a hefty advertising budget that touted the benefits of its value menu and healthier food options. Instead, it appears that McDonald's is being taken to the wringer by Subway, whose health-conscious fan base can get a plethora of healthier options for a similar price point and Jack in the Box (NASDAQ: JACK ) , which has heralded its all-day breakfast menu to big gains. The interesting thing here is Jack in the Box had been riding McDonald's coattails for as long as I can recall, and, at the moment, I'd say it's leading the pack in fast-food innovation among its immediate peers with its innovative menu options and the appealing interior remodel of its restaurants.
To that end, McDonald's might make for an intriguing short-sale opportunity here with it missing EPS expectations for the fourth time in the past five quarters and being valued at nearly 16 times forward earnings even after Monday's drop.
Navidea Biopharmaceuticals (NYSEMKT: NAVB )
Navidea Biopharmaceuticals may look like just another unprofitable small-cap precision diagnostics company, but I believe it could be on the cusp of taking off.
Diagnostics and radiopharmaceutical medicine are on the leading edge of personalized medicine, something that I feel has the potential to reshape patient treatment over the coming decades. While Navidea's products aren't going to bring in six-figure annual payments like ultra-orphan drugs can, you can certainly bet that its diagnostic products are going to be used on a widening scale across the country.
Navidea's initial claim to fame looks to be Lymphoseek, an FDA-approved injectable agent used in external lymph-node imaging and intra-operative lymphatic mapping to help in the localization of breast cancer and melanoma. Different stages of cancer respond better to differing treatment types, so getting a quick and accurate turnaround with regard to disease progression is paramount to improving treatment effectiveness. For marketing, Navidea has partnered up with Cardinal Health's (NYSE: CAH ) experienced staff, which should, in itself, help boost sales.
The exciting aspect about Navidea is that it may soon have much more punch than just Lymphoseek when it comes to staging breast cancer and melanoma. In addition to running effective late-stage trials on solid tumors -- which, were my arm twisted, I'd say Lymphoseek gains approval for as well before the year is out -- it recently initiated late-stage trials for NAV-4694, a PET-amyloid imaging agent that can help doctors detect plague on the brain in patients with, or suspected of having, Alzheimer's disease. In new data released this week, NAV-4694 performed better in detecting AD markers relative to the current standard Pittsburgh Compound-B, also known as PiB.
With a relatively inexpensive valuation and a slew of promising late-stage diagnostics working their way down the pipeline, I'd definitely say Navidea is worth keeping a close eye on.
QEP Resources (NYSE: QEP )
Among the myriad of diversified oil and gas companies you could choose from, QEP Resources is a name that often gets lost in the cracks. The reason it's been off most investors' radars for the past couple of years has to do with its reliance on natural gas to drive profits. As of the end of last year, it had 3.94 trillion cubic feet of natural gas in reserves, with the remaining 27% of its proven reserves in oil and natural gas liquids. With natural gas prices hitting decade lows last year, QEP has been an avoid in most investors' books. But times are a-changing!
Since the lows of last year, natural gas prices have essentially doubled, causing energy companies to rethink their game plan of focusing solely on liquids production, and putting some pricing power back into the hands of natural gas-heavy producers like QEP Resources. Also, simply possessing so much in natural gas resources gives the company an edge with the Obama administration looking for ways to reduce its dependence on foreign oil and boost its production of cleaner burning, or renewable, fuels.
Perhaps the sneakiest advantage for QEP that no one seems to have accounted for is the closing of the spread between Brent crude and West Texas Intermediate. Previously, drillers in the Bakken shale and other regions of the country had been shipping their oil by rail to Louisiana terminals to take advantage of Brent's higher pricing. Even with shipping costs factored in, they were walking away richer than if they had sold their oil at the wellhead or shipped it to Cushing, Okla., for WTI pricing. However, with that gap closed, midstream pipeline companies like QEP with pipeline infrastructure to Cushing are going to be big beneficiaries as drillers forgo shipping by rail and go back to traditional pipeline transmission to Cushing.
I consider QEP a sneaky energy play moving forward and would strongly suggest you get this company on your Watchlist.
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 McDonald's to My Watchlist.
- Add Navidea Biopharmaceuticals to My Watchlist.
- Add QEP Resources to My Watchlist.
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