A well-crafted watchlist is critical to smart investing: It can help you find attractive buying opportunities, and it can save you from bad decisions.

After all, investors can be their own worst enemies. When we overreact to the day's news, we make rushed decisions driven by emotion. A watchlist can help you slow down the process, examine the risks, and essentially take a deep, money-protecting breath.

But what to put on your watchlist? Today, Million Dollar Portfolio associate advisor Charly Travers shares three companies that have taken up residence on his watchlist and one that has since made the jump to the Million Dollar Portfolio team's portfolio. By the way, the Fool now offers MyWatchlist.com, your customized hub to follow the performance and Fool news and commentary about the companies you're watching.

One to watch
In the run-up to President Obama's inauguration, the nation's gun buyers went on a shopping spree, fearful that their access to firearms would be curtailed. With their gun-purchasing needs taken care of, sales in the industry slowed, meaning a lull for Sturm, Ruger (NYSE: RGR) and Smith & Wesson Holding (Nasdaq: SWHC), the two publicly traded gun companies. But when gun sales recover, Sturm, Ruger is far better positioned to take advantage, Charly says.

New management came on board in 2006 and turned Sturm, Ruger into an efficient, incredibly profitable firm. The leaders don't bother talking with industry analysts; they're just focused on creating consistently outstanding results.

For now, Charly's keeping an eye on the FBI and the number of background checks the agency is running on prospective buyers -- a proxy for demand. Once that number starts to climb again, look for Sturm, Ruger to capitalize.

Two to watch
Similarly, Lumber Liquidators (NYSE: LL) is a well-run business that's been affected by forces outside its control. The company, which buys straight from lumber mills and passes its lower costs on to consumers, is hindered by the fact that most folks don't remodel during a recession. And after a hideous earnings report this week, the stock was pummeled. But that just might make it a buy.

The company is in the fourth or fifth inning of its growth story -- it has around 215 stores and could comfortably expand to 400 -- and revenue per employee during 2009 was around $600,000. Charly's waiting to get comfortable with the recently reported numbers and ensure that there are no surprises therein, but he sees this as a long-term winner.

Three to watch
Coach (NYSE: COH) has been living through the same economic downturn, but you wouldn't know it by looking at the company's balance sheet. The seller of designer handbags and other discretionary items has been on fire, both in terms of operations and share price, and it has huge international growth opportunities still ahead. This one almost made it from Charly's watchlist into his portfolio -- when it was at $40 per share, he was looking for a drop of a dollar, maybe two, before pulling the trigger -- but a stylish earnings report sent prices soaring to more than $50 per share. Charly's going to keep watching, although it seems he'll have longer to wait for it to drop into his zone.

And one he bought
"I never thought I would be interested in buying shares of Microsoft (Nasdaq: MSFT)," Charly says. "Everyone knows and loves the company, but it's always been incredibly expensive. But now it's unloved and out of favor -- the story these days is always Google or Apple."

But it's impossible to ignore the numbers. Even with recent stumbles and a lack of resonance with consumers, Microsoft is humming with business clients, to the point that its free cash flow for the past quarter is equal to Google's free cash flow for the entire past year.

"It's hard to imagine that Microsoft got to be overlooked, but that's exactly what happened," Charly says. "And it got to the point where it was just too cheap not to buy."

And that's exactly why it pays to watch. You can make smarter investing decisions with your own version of My Watchlist, new and free from the Fool. Click below to start following one of the stocks mentioned above: