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.
I've been waiting for Exelon, and much of the utility sector, to have a sizable pullback, and it appears my wishes have come true. Exelon has been hit by a myriad of issues including the high costs associated with running more nuclear power facilities than any other electric utility, and now the repair costs and decreased energy demand associated with Hurricane Sandy.
Yet plenty of factors could lend themselves to a robust next couple of years for Exelon. First, the company's acquisitions of Constellation Energy and Baltimore Gas & Electric are expected to be accretive to earnings as soon as 2013 and will help diversify its operations somewhat away from nuclear energy. Secondly, to me the chances appear increasingly likely that the next administration is going to help Exelon and other nuclear energy producers out with a subsidy that'll make nuclear energy more price-attractive relative to coal and natural gas. Exelon is also doing a good job of expanding its alternative energy capabilities, recently signing a 16.1 MW solar grid contract in Maryland with First Solar (NASDAQ:FSLR). Finally, Exelon's sustainable dividend is now yielding better than 6%.
This mix of factors could be the spark that lights a fire under Exelon's share price next year.
As my Foolish colleague Alex Planes recently noted, the trend is most definitely not Corning's friend. The diversified company, which has six separate business segments, has struggled with weak, tepid growth prospects and weaker margins. Its latest quarter was marked by a 2% decline in sales as the company cautioned that it may take up to a $50 million restructuring charge and reduce headcount in order to cut expenses.
While these weren't the optimal results anyone was looking for, it's difficult to deny that Corning's diversified operations, its future on paper, or its strong balance sheet paint a bright picture for the future. As I commented during our weekly analyst debate with my Foolish colleagues Travis Hoium and Alex Planes, Corning's environmental technologies segment and specialty chemicals segment (i.e., the one that produces Gorilla Glass II for smartphones and tablets) are what interest me. Corning is now trading at less than nine times forward earnings, has $2 in net cash per share, pays out a 3% yield, and is valued at just 80% of book value. Its free cash flow may be less than stellar, as my colleagues have opined, but this appears to be too cheap a company to pass up.
Coldwater Creek (NASDAQ: CWTR)
A reverse split (aka where bad stocks turn to live to see another day) has breathed new life into Coldwater Creek shares, which have more than doubled off their lows. Unfortunately for shareholders, boosting the company's share price through a reverse split has done little to reverse its nasty trend of declining sales and mounting losses.
Coldwater Creek's second-quarter results in late August weren't good, period! Consolidated sales dipped by 10% year over year, expenses as a percentage of net sales rose by 150 basis points, and it reported yet another quarterly loss. The company has tried multiple turnaround campaigns, but none have taken hold yet. Its peer Chico's (NYSE:CHS), on the other hand, completely turned its fortunes around by focusing on putting the requested merchandise in front of customers and minimizing its discounting. Coldwater, which lives and dies by its product assortment, simply can't seem to figure out what its customer base wants, which is very similar to the situation Talbots recently found itself in prior to being purchased by private-equity firm Sycamore Partners.
Coldwater is the perfect example of a zombie stock, and I'd be looking to bet against the company if it dares head much higher.
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 companies to your free, personalized watchlist to keep up on the latest news on each company:
Will Corning's reliance on Gorilla Glass II for growth be a boon or a bane to its margins? Find out the answer to this question and much more by getting your copy of our latest premium research report on Corning. Packed with in-depth analysis on the opportunities and threats facing Corning -- and complete with a year of regular updates -- this report will give you the tools needed to make smart long-term investing decisions. Click here to get your copy.