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3 Stocks to Get on Your Watchlist

Sean Williams
November 14, 2012

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.

Zynga (Nasdaq: ZNGA  )
I'm beginning to think that the next Zynga game to come out should be called Words With Anybody; Where'd All My Friends Go?¬†Perpetuating the exodus of executives that we've witnessed over the past few months, Zynga announced yesterday that its chief financial officer, David Wehner, was jumping ship to join, of all companies, Facebook (Nasdaq: FB  ) . You might be thinking, "Another corporate executive left; no big deal!" But this is actually a very big problem.

Zynga's inability to attract and hold on to creative leaders is rapidly shaping up to be its downfall. Zynga relies on creativity and development to drive its business, and it's losing key players on both of these fronts. In Zynga's latest quarterly report, we saw just how dire things are becoming. The real story wasn't the company's $0.07 loss or pitiful 3% year-over-year sales growth. No, it was actually the horrific 19% drop in average daily bookings per user and the 28% sequential drop in monthly unique payers. To put that in English, few people were paying for Zynga's games before this quarter, and now it appears even that number is shrinking. I would consider using any rally in Zynga as an opportunity to bet against a business with very little chance of surviving over the long term.

Beazer Homes (NYSE: BZH  )
With so many companies reporting earnings during earnings season, it's easy for many to fall into the cracks. For Beazer Homes, the gaping hole it left yesterday between Wall Street's consensus loss estimates and its actual results is enough to fit the Goodyear blimp into!

For the fourth quarter, Beazer recorded a 10% boost in new home orders as cancellation rates dropped and homebuilding margins improved by 90 basis points. This is more or less in line with what we've seen from the sector as a whole, which has benefited from stabilizing, even rising, prices and better loan liquidity for the consumer. What wasn't expected was Beazer's quarterly loss of $2.82 when Wall Street expected a loss of $1.22 -- not even in the ballpark. What's more, JPMorgan Chase actually defended Beazer's results, maintaining its overweight rating and $18 price target and proclaiming that Beazer's turnaround is on track.

My opinion is that Beazer is on track, all right... on the track to bankruptcy if it keeps losing money like it is now. Loss estimates for next year are expected to top $5 per share, and I'm personally left wondering how utopian the conditions in the housing sector need to be for Beazer to turn a profit? With debt extinguishment counted against earnings, and with Beazer carrying $1 billion in net debt, shareholders are going to get awfully used to seeing red around earnings time. This is another company high on my short-selling list.

Skullcandy (Nasdaq: