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3 Stocks to Get on Your Watchlist

Sean Williams
November 6, 2013

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 with 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.

Jabil Circuit (NYSE: JBL)
Oh the profits and perils of electronic-circuit manufacturing! Sometimes the problems outweigh the reward potential, while at other times these problems create an emotional overreaction to the downside, which can lead to an attractive buying opportunity.

Jabil is one of the largest electronic manufacturing services, or EMS, companies in the U.S. It counts numerous cellular-device makers among its customers, including Apple and the struggling BlackBerry (NASDAQ: BBRY). In fact, BlackBerry's smartphone struggles are one key reason that Jabil has posted revenue growth lately and been so conservative with regard to its forecast. As Jabil's fourth-quarter report notes, the very business model of Jabil's second-largest customer in 2013, BlackBerry, is in question right now. According to AllThingsD, Apple and BlackBerry respectively accounted for 19% and 12% of Jabil's revenue last year. Given this and the ongoing weakness in PCs and the commoditization of electronics in general, EMS companies like Jabil have their work cut out for them.

But if Jabil's fourth-quarter report taught me anything, it's that the company is a diversified cash-generating machine that will be fine in the long run, even if its BlackBerry partnership ends. For the year, Jabil generated more than $1 billion in operating cash flow on record revenue of $18.3 billion, a 6% increase over the previous year. That's pretty impressive, considering the domestic weakness in EMS pricing and demand.

It's also all about its partnerships and potential. With Jabil responsible for making the aluminum casing for Apple's iPhone 5, I really don't see a scenario in which it's not busier than a bee. In the most recent quarter, Apple noted sales of 33.8 million iPhones -- that's a lot of cases for Jabil! In addition, the ongoing rollout of 4G LTE networks is cascading billions in capital expenditures down the pipeline to fiber-optic companies, networking solution providers, and EMS companies like Jabil.

At less than eight times forward earnings and a minuscule 3.6 times cash flow, I'd strongly suggest giving Jabil a closer look.

General Motors (NYSE: GM)
OK, so General Motors and Ford (NYSE: F) may have switched roles so that GM is now the U.S. automotive sidekick and Ford is wearing the Batman costume. But there's no shame in being a strong No. 2, and it's about time investors realized that.

U.S. automotive sales have been absolutely stellar this year, with unit totals pacing close to 16 million, which would be a post-recessionary high. Automakers are generally finding strength in two categories: smaller, more fuel-efficient cars and light trucks, which are suddenly getting much better fuel economy than they were a decade ago.

In the smaller-car category, Ford's Fiesta and fuel-efficient Fusion are cleaning up, while nearly the entire lineup of GM's Buick and Cadillac vehicles is delivering a double-digit surge in demand. In trucks, General Motors' newly redesigned Silverado and Sierra should help kick-start sales that have trailed Ford's F-Series pickups for years.

We're certainly beginning to see the fruits of GM's labors. The redesigned Silverado and Sierra are selling so well that GM is having trouble keeping up with demand, while growth in China has remained a buoy that has kept GM's European struggles on the back burner and off investors' radars. As I mentioned above, General Motors doesn't quite have the pizzazz to counter Ford's F-Series or EcoBoost engine just yet, but it's delivering high-digit growth in the U.S. and low double-digit unit sales growth in many other rapidly growing emerging markets.

With another minuscule forward P/E of just eight, I think it's time to put the bad memories of GM in the rearview mirror and give this industry stalwart another look.

Ruby Tuesday (NYSE: RT)
You know those instances where you absolutely can't figure out how a company manages to stay in business? Meet restaurant chain Ruby Tuesday, a company whose eulogy I've been writing for years but that I've thus far been wrong about.

Ruby Tuesday operates in the casual-dining segment, so it's going head-to-head against midtier price-point chains like DineEquity's Applebee's and privately held TGI Fridays. The problems for Ruby Tuesday are coming from literally every direction. It has tried boosting its marketing budget on multiple occasions to drive in customer traffic, but that has rarely worked beyond a few months. Ruby Tuesday has also tried promotional items and huge discounts to drive traffic. This has worked a little better, but it hasn't been effective at getting consumers to step up to higher-priced discretionary items once in the restaurant. And if by chance either its marketing or promotional activities were working, food inflation chose not to cooperate.

Then ca