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 with 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, these aren't concrete buy or sell recommendations, and I don't guarantee I'll take action on the companies being discussed. But I promise 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.
For those of you who are used to me being a staunch value-driven investor, make sure you have a comfort food nearby because I'm starting us off aggressively this week with a company valued at 151 times trailing-12-month earnings in eHealth.
eHealth is a private party insurance platform that allows individuals, families, and small businesses to search for and sign up for health insurance. As you might imagine, the problems with Obamacare's website, Healthcare.gov, has created enormous concerns when it comes to people attempting to sign up for health insurance under the Patient Protection and Affordable Care Act. No one wants to be penalized and a number of people would actually like to sign up, but most have been unable to due to technical glitches with the health exchange itself.
There are multiple ways consumers can go about signing up, including a paper application and by phone, but eHealth's private platform is booming as a working alternative to Healthcare.gov. Considering that the Obama administration has already taken numerous blows from the opposition because of delays, including pushing back the employer mandate a full year, I'd almost have to think they'll do everything possible to not delay the implementation of the individual mandate, which would also work in favor of eHealth's platform.
I don't say this often, but I would suggest that eHealth's 2014 revenue growth projection of 18% might be extremely conservative. With that being said, I would certainly recommend adding it to your watchlist and keeping an eye on eHealth, especially as the government-imposed deadline to fix Healthcare.gov by the end of November approaches.
Tata Motors (NYSE:TTM)
If you haven't been riding the automotive market higher the argument could very well be made that you've missed the boat... unless you're looking overseas, that is!
If your ventures into the auto market predominantly involve General Motors and Ford (NYSE:F) in the U.S., let me expand your horizons to include India's Tata Motors. Tata, in its recently reported second-quarter results, delivered revenue growth of 32% compared to last year and somehow considered the existing environment challenging! Similarly, profit exploded higher by 75% from the year-ago period.
Tata tends to focus on smaller vehicles and caters to India's burgeoning middle class because of outsourced technology and service jobs, which can be had for a significantly cheaper rate than in the U.S. Ford has made the leap into India as well, seizing the opportunity to cater to this middle class. In November, Ford India reported a whopping 36% increase in unit sales, led by its fuel-efficient EcoSport.
But what's truly intriguing about Tata is that it still controls about 57% of India's commercial market share (an astronomical figure) and a steady 6% of its passenger vehicle market share. India is an emerging market with what I suspect is GDP growth potential of 5% or greater for the next decade, and Tata, at just nine times forward earnings, is incredibly inexpensive by all fundamental standards. I would certainly suggest more closely checking under the hood here, but I believe you'll like what you'll find.
M/I Homes (NYSE:MHO)
Short sellers, this one's for you!
As many of you may know if you regularly follow this series, I'm quite a skeptic when it comes to the housing market. Although I've been dead wrong when it comes to certain aspects of housing, interest rates are what will ultimately dictate demand in this industry. Through May of this year, housing demand was soaring as mortgage rates pushed to record lows. However, since May, mortgage loan originations, including refinancing activity, is roughly 60% off its highs. That's bad news for homebuilders in general, and I believe especially bad news for M/I Homes.
As I discussed last week, M/I operates primarily out of the Ohio River Valley and Chesapeake Bay region, where home prices are seeing the weakest appreciation of anywhere in the country. That was prevalent in M/I Homes most recent quarterly results, where it delivered an average selling price improvement of 7% compared to an industry that has regularly produced average home sales price increases of 12% to 15%.
The way I look at M/I Homes is this: If lending rates are less than 100 basis points off an all-time record low and consumers are sitting on their hands and its pricing power is already weaker than practically every other homebuilder in the sector, how much better can it really get? Admittedly, M/I has one of the lower P/E ratios in the sector, which makes up for its built-in risks, but I could just as easily see its share price head even lower.
Is my bullishness or bearishness misplaced? Share your thoughts in the comment 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: