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. 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.
You can go ahead and give yourself all the reasons in the world why Apple should sell off after announcing its Street-topping second-quarter results, but I can give you 145 billion reasons why it remains an intriguing buy!
For the quarter, Apple reported an 11% increase in revenue to $43.6 billion as it upped sales of the iPhone to 37.4 million from 35.1 million in the year-ago period, and iPad sales launched to 19.5 million from 11.8 million. Yes, PC sales remain a weak point with Mac sales dipping again, but overall this was another strong quarter of cash flow generation and consistent execution.
Not only did Apple end the quarter with $145 billion in cash, but it also announced a long-awaited increase in its dividend and a big boost in its share repurchase program. Apple upped its dividend by 15% to $3.05 per quarter and plans to return $100 billion in capital to shareholders through these dividends and share buybacks over a three-year period. As such, Apple's board authorized a 500% increase in its share repurchase program to $60 billion from $10 billion that is expected to be completed by the end of calendar 2015.
Again, what's wrong with Apple? Other than a big group of emotional traders, nothing that I can tell!
Chipotle Mexican Grill (NYSE:CMG)
Sticking with the theme of earnings-driven stock moves, fresh-Mex restaurant chain Chipotle rocketed higher last week after reporting better-than-expected first-quarter results.
For the quarter, Chipotle delivered a 13% increase in revenue to $726.8 million as adjusted EPS jumped 24%, but it achieved this mainly through the opening of new stores. Chipotle's actual same-store sales growth improved just 1%. Looking ahead, Chipotle cautioned investors to expect same-store sales growth to be flat to up low-single-digits.
As I take everything into consideration with Chipotle, I can't help but come to the conclusion that it's grossly overvalued at current levels. It does have the benefit of catering to healthier casual dining consumers who appreciate that their meat isn't laden with unnecessary antibiotics. Then again, Chipotle is walking a very thin tightrope of not raising prices in order to keep customers from being driven to competitors. It shunned boosting prices last year and its margins have suffered because of it.
Until taxpayers become more acclimated with their smaller spending budgets due to higher taxes, and Chipotle comes to terms with the fact that pricing power is its best friend, I'd suggest looking at this from a short-selling standpoint.
Canadian National Railway (NYSE:CNI)
Once more the theme is an earnings-driven event. Canadian National, known as CN, is a railroad company to the north that delivered net income of $541 million in the first quarter compared to the $755 million it reported in profits in the year-ago period. Despite tougher weather conditions being one of the primary factors for the volume shortfall, investors still came down on Canadian National.
However, I see CN as a sneaky oil and bitumen transport play from the oil-heavy Bakken formation. One-trick drillers like Continental Resources (NYSE:CLR) have been utilizing its shipping their oil by rail past Cushing, Okla., to Louisiana terminals and netting the difference between the higher Brent crude price as compared to the West Texas Intermediate price after shipping costs. Continental is currently shipping 65% of its oil production in the Bakken this way, proving it's obviously a profitable venture.
Similarly, CN can be viewed as a prime transporter of oil and bitumen into various regions of Canada. As the U.S. looks to beef up its energy reserves, you can expect oil production, especially in the oil-rich Bakken, to increase, only furthering the need for transport by rail. We obviously can't predict the impact of weather on CN's operations, but the demand for its services is bound to remain strong for decades to come.
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: