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 understand there's a good chance that some of you out there already have cloud-infrastructure and storage specialist EMC on your watchlist, but as for the rest of you, what are you waiting for? If it's an invitation that you're seeking, then consider this a formal invite!
EMC is at the forefront of cloud spending in terms of helping enterprise customers of varying sizes develop and personalize their cloud, while also supporting the back-end storage service applications. According to estimates by Cisco Systems, cloud revenue will hit $241 billion by 2020, so EMC is sitting right in the melting pot of corporate spending on infrastructure. Unfortunately, a slowdown in spending by companies that are standing pat until we have a fiscal cliff resolution has hurt near-term revenue for EMC.
Although I'm not taking the plunge into EMC just yet, as I too would like to see what sort of resolution we get out of Congress, I see EMC as a long-term winner. EMC has very few competitors anywhere near its size or scope in storage, and its ownership stake in cloud-virtualization provider VMware (NYSE:VMW) which it spun off five years ago, should continue to pay big dividends. Keep your eyes on this cloud specialist.
First Niagara Financial (NASDAQ:FNFG)
Can a regional bank get some freaking respect?! First Niagara Financial may have caved into pressures to lower its previously pristine dividend as economic weakness and cash-raising activities weighed on its loan portfolio, but the bank has taken tangible steps to improve its balance sheet, boost results, and position itself for long-term growth.
To begin with, First Niagara agreed to purchase 195 bank branches from HSBC (NYSE:HSBC) for the sum of about $1 billion. It did wind up selling 20% of those branches to KeyCorp (NYSE:KEY) to satisfy regulators who worried about the bank's near monopoly in upstate New York, and it did dilute shareholders to raise cash for the deal, but it now boasts an additional $2.74 billion in loans and deposits over the year-ago quarter, and it's seen commercial loan growth consistently in the double digits for 11 straight quarters.
Another factor that has me intrigued is First Niagara's dirt cheap valuation. I understand its most recent quarter was marred by one-time acquisition costs, but consider that the bank is valued at just 59% of book value, pays out a 4.2% yield, and is trading at just 10 times forward earnings despite grabbing a lion's share of the upstate New York market. It's not often that banking stocks impress me, but First Niagara has done just that!
Aurizon Mines (NYSEMKT:AZK)
Speaking of sectors getting absolutely no respect, junior gold miners still can't seem to find their way out of a paper bag after a brief rally three months ago. Admittedly, gold prices have been in a holding pattern, waiting for some sort of resolution for the fiscal cliff crisis. For companies like Aurizon Mines that rely on the rising price of the yellow metal to drive margins, that's been a sour point.
Aurizon has also been hurting financially because of an expansion of its only gold producing mine, Casa Berardi. Ore yields in recent months have dropped, and the company has announced the spending of extra capital to expand the Casa Berardi mine east of the current mine shaft, resulting in a reduction of projected gold production and higher costs.
However, looking at this from another perspective, Aurizon is in a position very few other junior miners are in, in that it has no debt and $199 million in cash. The company's positive free cash flow more than accounts for its increased capital expenditures, as well as funds its drilling activities in Heva, Hosco West, the Marban property, and its Fayolle property. Ultimately, Aurizon's Casa Berardi expansion could push production to 160,000 ounces annually and should be a major positive for the company.
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 with each company:
- Add EMC to My Watchlist.
- Add First Niagara Financial to My Watchlist.
- Add Aurizon Mines to My Watchlist.
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 EMC, VMware, Cisco Systems, and KeyCorp. Motley Fool newsletter services have recommended buying shares of VMware. 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.