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.
Last month SUPERVALU's many attempts to catch a fish worked as it reeled in a $3.3 billion consortium bid from private-equity firm Cerberus and other investors. In the deal, SUPERVALU gives up its Albertsons, Jewel-Osco, Acme, Shaw's and Star Market franchises. In return, shareholders get better business clarity, $3.2 billion of SUPERVALU's monstrous debt pile will be assumed by the purchasers, and SUPERVALU's business becomes much more focused on its wholesale business, as well as its remaining franchises, including Save-A-Lot.
Another aspect of the deal is up to a $250 million purchase of SUPERVALU's outstanding shares by a Cerberus-led group up to $4 per share. But, with its share price hovering near $4 already, there's little room left to the upside based on this secondary investment.
It's also worth noting that SUPERVALU is taking on an additional $2.4 billion in loans/revolving credit that will give the company a net reduction in debt of just $800 million.
Even more pressing, while giving SUPERVALU more financial flexibility, it still puts the grocer light years behind its peers in remodels and convenience. Take Kroger (NYSE:KR), for example. Kroger has already remodeled many of its stores, installed fueling stations for customer convenience, and introduced healthier organic and natural products into its stores, which helped boost its same-store sales figures to a gain of 3.2% in the third quarter over the year-ago period and allowed it to raise its full-year EPS forecast. SUPERVALU never had the capital to orchestrate a companywide remodel, and now that it does, it's going to take years to see the effects that Kroger is experiencing right now.
Personally, I see this as more of the same from SUPERVALU and will be looking for more downside.
Coldwater Creek (NASDAQOTH:CWTRQ)
Speaking of retailing disasters, I'm not sure what's been going on with Coldwater Creek over the past few months, but its bottom-line results would suggest it's heading lower rather than higher. Coldwater, which sells mature women's apparel and accessories, has been in a multiyear, seemingly never-ending turnaround campaign that's resulted in store closures, more attention given to inventory assortments, and tight cost controls -- and yet it still keeps losing money.
The fourth quarter is the make-or-break time of the year for retailers as Christmas shopping tends to drive higher-margin products out the door. For Coldwater, mid-January was another chance to crush investors' dreams by guiding its own previous forecast for an EPS loss of $0.55 to $0.65 down to a loss of $0.70 to $0.80 per share. The company blamed weak store traffic in early November and December for steep price cuts, which hurt margins, but to me this sounds more like business as usual for Coldwater.
What I find really troublesome is how incredibly weak direct-to-consumer revenue has been. Coldwater is one of a very, very select few retailers whose online sales are actually falling! If people aren't buying online, and they clearly aren't buying in your stores (as evidenced by the January earnings warning), then there's a serious problem that needs correcting. This could mark the perfect time for a bet against Coldwater Creek.
Dole Food (UNKNOWN:UNKNOWN)
I often shy away from paying much attention to analyst upgrades and downgrades, but a recent article from Barron's on Dole has me nodding my head in agreement that it could be headed higher in no time.
The big catalyst that Barron's notes is the $1.69 billion purchase of Dole's packaged fruit and fresh produce business in Asia by Itochu (NASDAQOTH:ITOCY), with Itochu also getting exclusive trademark rights to the Dole brand name in Asia. The deal makes a lot of sense from an investing perspective because Dole had $1.69 billion in debt as of its most recent quarter and Itochu is paying entirely in cash (there's no coincidence there!). This means Dole could essentially be debt-free, or nearly debt-free, once this deal closes. As the Barron's article also points out, investors have drastically undervalued Dole's land assets, which are estimated to be worth about $500 million.
The resulting company will boast operations in North America and Europe, and fruit will account for about 80% of total sales. Barring an unfavorable weather event that would affect crop prices, Dole is a cash-flow powerhouse that could soon be paying out a dividend to shareholders and could wind up trading at a much lower forward multiple than its peers. This deal skirted most people's radars, but Dole is a household name that may deserve a second look for your portfolio.
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:
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 SUPERVALU. 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.