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 what's really moving the market. Even worse, I'd be lost when it came time 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, 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.
Chesapeake... you're killing me here! I don't even own the stock, and it's frustrating the daylights out of me. Following a gaffe of titanic proportions that may have led to a conflict of interest between CEO Aubrey McClendon and his shareholders, Chesapeake followed today with a significantly worse-than-expected first-quarter report.
Everyone had been expecting Chesapeake's profits to be down year over year, but I don't think anyone was quite expecting a $0.11 loss per share -- especially Wall Street, which had looked for a $0.30 profit. Even on an adjusted basis, Chesapeake missed badly. Hedging losses worked against Chesapeake's bottom line as the company's average selling price declined to $2.35 per thousand cubic feet from $5.99 a year earlier. For the icing on the cake, Chesapeake lowered its 2013 capital budget from a previous forecast of $7.5 billion-$8.5 billion to just $6.5 billion-$7 billion.
Perhaps the only good news of the day was the announcement that McClendon would be stepping down as chairman and that the Chesapeake board would end the practice of having McClendon share stakes in the company's wells. However, this is only one of many steps needed to cure what has been one PR disaster after another. Chesapeake's assets are definitely worth something, but the gaffes are becoming too much to handle.
The dark days of defense are right around the corner, but that didn't stop Lockheed Martin, my personal favorite company in the sector, from reporting results last week that outpaced the consensus estimates.
With an estimated $500 billion set to be cut out of the U.S. defense budget if lawmakers can't agree on a way to reduce the federal deficit by January, Lockheed has turned to international orders, which often bear higher margins, for growth. In addition, Lockheed has begun scaling back operations and cutting costs where it can to preserve profits.
But is this all the defense sector has been reduced to: cost-cutting? If that's the case, I'm going to have to recommend that serious caution be exercised in light of bleak growth prospects. We already saw profits at L-3 Communications
Don't fall over, but I'm inching even closer to being bullish about microturbine producer Capstone Turbine. Although the company reported a wider-than-anticipated loss of $0.03 in its latest quarter, there were plenty of positives to take away.
First, and most important, gross margin increased to 8.5% of revenue and marked the fifth time in the past six quarters that we've seen gross margin growth. Second, backlog saw a nice uptick to $115.1 million, which was $30.4 million higher than last year. Finally, even though there was a decrease in the amount of microturbine units shipped, the average selling price per unit jumped dramatically to $161,000 from $110,000 the year earlier. With gross margins improving and Capstone on the verge of profitability, it appears that patient shareholders may soon be rewarded.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below and consider following my cue by using the links below to add these three companies to your free personalized watchlist and keep up on the latest news with each company.
- Add Chesapeake Energy to My Watchlist.
- Add Lockheed Martin to My Watchlist.
- Add Capstone Turbine to My Watchlist.
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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He's a total nerd when it comes to making lists. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
The Motley Fool owns shares of Lockheed Martin, L-3 Communications, and General Dynamics. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy and L-3 Communications. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that believes transparency comes first.