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 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, 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.
Arena, a biotechnology firm focused on treating obesity, has tripled in just the past six weeks as its lead drug candidate, lorcaserin, received an 18-4 nod of approval from the Food and Drug Administration's advisory panel. Although that's not a lock for approval as the FDA is not obligated to follow the recommendations of its panel, it generally serves as a good indicator that lorcaserin is on the right path.
This doesn't, however, mean that Arena is set to trounce the competition, because it still has plenty of obstacles to overcome. Vivus'
In a market aimed at trimming the fat, shareholders are looking to get fat eating off obesity drug profits. Arena is an interesting company worth watching at these levels.
Integrated Device Technology
The business of integrated circuitry for the communications, computing, and consumer industries is far from glamorous. Often, demand for these products ebbs and flows with the economy, and since economic predictions are about as accurate as weather forecasts, inventory levels are usually impossible to predict beyond a few quarters. Despite this, IDT remains profitable and extremely cheap.
The company itself has generated positive free cash flow in each of the past nine years and currently boasts $325.5 million in cash with no debt (for the moment) -- it's using some of that cash and utilizing debt to purchase PLX Technology for $330 million. For reference, IDT's market cap is only $747 million. In short, the company's products are a play on the continued expansion of our nation's telecommunications infrastructure as well as on computing and consumer network optimization. Growth levels aren't going to be off the chart, and there will be hiccups along the way, but at its current valuation, I feel it makes a compelling buy candidate.
If you've been looking for natural-gas-heavy companies that are being beaten down because of near record-low prices that could rebound, then you may want to give WPX a closer look.
WPX, which has oil and gas reserves in the Piceance Basin, Bakken shale, and Marcellus shale, has been shrinking its focus of late on producing oil and natural gas liquids -- a move that should net the company considerable profits over the next few quarters once its one-time writedowns are out of the way. Just last month, WPX sold off its assets in Texas' Barnett shale region and the Arkoma Basin in Oklahoma to an affiliate for $306 million. The move strengthened its balance sheet and reaffirmed its focus on NGL and oil production, which increased 26% over the year-ago period based on its first-quarter results.
WPX may be an eyesore to look at now given its recent impairment charges and its previously heavy reliance on natural gas for revenue, but the changes it's enacting could translate into surprising earnings beats as early as next year.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below, and consider following my cue by using these links to add these three companies to your free personalized watchlist and keep up on the latest news with each company:
- Add Arena Pharmaceuticals to My Watchlist.
- Add Integrated Device Technology to My Watchlist.
- Add WPX Energy to My Watchlist.
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