3 Stocks to Get on Your Watchlist

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 these aren't concrete buy or sell recommendations, and I don't guarantee I'll take action on the companies being discussed. But I promise 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.

IBM (NYSE: IBM  )
Don't look now, but Big Blue just saw its first dip below $180/share since the beginning of 2012. The reason for the recent concern from investors and Wall Street relates back to recent weakness from IBM's hardware business, as well as from peer Oracle (NYSE: ORCL  ) .

Oracle, for example, reported its first-quarter results just three weeks ago, and they again missed expectations. Within that report it listed a wide range of -4% to 6% for software and subscription growth in the second quarter, with revenue expected to finish flat when including negative currency translation. Oracle's weak subscription and software growth includes its cloud-based operations, meaning that even its highest-growth operations are struggling domestically and overseas.

For IBM, though, it's been a leader in setting goals and hitting them. I fully understand talk is cheap, but IBM has a tendency to lay out five-year plans and hit them every time. The latest plan with its 2015 effective target includes $20 in annual EPS, $100 billion in cumulative five-year free cash flow, $7 billion in annual revenue from cloud computing (what would amount to 5% to 6% of annual revenue), and 30% of total revenue from growth markets (i.e., emerging markets). Even with hardware makers struggling, I would say these are very doable targets for IBM. In fact, that's what makes Berkshire Hathaway's (BRK-B) Warren Buffett a huge stakeholder in IBM with more than 5% of all outstanding shares. Buffett certainly isn't perfect, but he knows a good value and solid management when he sees it!

Currently, IBM is valued at about 10 times forward earnings, and it's explicitly turning its focus to cloud computing, emerging markets, and trimming the fat. Between job cuts and its best backlog figures in four years during the second quarter, I'd say IBM is still on track to meet its 2015 goals and prove Buffett a genius yet again. I'd suggest adding Big Blue to your Watchlist if you haven't done so already.

Remy International (NASDAQ: REMY  )
Sometimes low-volume, small-cap stocks can make for the most intriguing finds. Today I give you Remy International, a $685 million starter and alternator manufacturer for automobiles and light trucks that only trades about 55,000 shares daily.

What's particularly intriguing about Remy is that its current results could easily send investors running the other way, but if you read deeper into their game plan you'll realize that this company is setting itself and investors up for future success.

In its most recent quarter, Remy actually reported a 4% decline in total sales despite what you'd expect to be a robust North American market. U.S. auto sales are essentially pacing 16 million units on a seasonally adjusted annual basis, which would mark a six-year high that should, in turn, be helping Remy's business. Most investors would skim those first couple of lines, turn around, and head out the door to find another opportunity. As for me, I prefer to read between the lines.

Within that same report you'd also see that Remy completed the remaining 49% purchase of Remy Hubei Electric in China, giving it full ownership of the company, doubling its alternator output in the region, and pushing its starter output much higher. Remy also announced it had gained a starter contract with Caterpillar India. In other words, Remy is positioning itself perfectly for success in China and India, which are the world's fastest-growing auto markets. Even if North America and Europe struggle, Remy should be set in 2014 and beyond to capitalize in these regions.

At just 11 times forward earnings, this auto parts supplier is worth keeping an eye on.

Pandora Media (NYSE: P  )
Don't worry, short-sellers -- I haven't forgotten about you! This week I give you Pandora Media, a fast-growing Internet radio provider.

On the surface Pandora is definitely delivering positive metrics. For the month of September, active listeners rose 25% to 72.7 million while listening hours jumped 18% from the year-ago period. Looking back a bit further to Pandora's second-quarter report in August, it delivered 92% non-GAAP mobile revenue growth and 153% non-GAAP subscription-based growth. But that's where my praise of Pandora ends.

In that same quarterly report we also find out that advertising revenue accounted for 79% of Pandora's total sales. During the dot-com bubble we learned that ad-based Internet models are rarely good investments. Nearly all ad-based Internet companies of that era went out of business. I'm not going so far to say that this is Pandora's fate, but it's a long way off from commanding high prices and steady business relative to say a vaunted search engine.

Another issue: show me the money! Where are the profits? The cash flow? The "anything" to signify this experiment is moving in the right direction? Over the past five years Pandora has had a free cash outflow of $63 million and recently issued 13 million newly dilutive shares onto the market only to see its share price skyrocket! The math doesn't make sense here.

Finally, who's going to ignore the 800-pound gorilla in the room? Apple's (NASDAQ: AAPL  ) iTunes Radio, which only recently debuted, attracted 11 million unique listeners within just the first five days. That's 15% of Pandora's total unique monthly listeners -- in five days! Apple has the devices -- the iPad and iPhone -- to tie in its music service so it doesn't have to worry about advertising nearly as much, and it's absolutely capable of trying new things with a ridiculous cash balance approaching $140 billion. I simply don't see a pathway by which Pandora Media succeeds and would consider this a fantastic short-sale opportunity.

Foolish roundup
Is my bullishness or bearishness misplaced? Share your thoughts in the comment 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:

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