I follow quite a lot of companies -- some closer than others -- 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 what's really moving the market. Even worse, without my watchlist, I'd be lost when it came time to choose what stock I'm buying or shorting next.
What I intend to do as an experiment is to make every Wednesday "Watchlist Wednesday," when I'll discuss 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, 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.
Bank of America (NYS: BAC)
I can think of no better way to begin this week's three picks than with Bank of America, a core holding that I added to last Wednesday.
Bank of America has a lot of problems it's working through. First, it possesses a relatively low tier 1 common equity ratio in relation to other big-money center banks Citigroup (NYS: C) and JPMorgan Chase (NYS: JPM) . Second, it has a moderate amount of exposure to European debt, including $1.5 billion to Italian debt. Finally, it's been dealing with historically high levels of home delinquencies and foreclosures. And yet buy more I shall!
Bank of America's earnings estimates have quietly been creeping higher following the pounding it put on consensus estimates in the third quarter. B of A has a chance to end 2012 as the largest deposit center bank in the U.S., surpassing JPMorgan, and has been divesting itself of some of its assets of late in order to raise precious capital. I would not be surprised to see its tier 1 capital ratio jump from the 8.65% it reported in the third quarter to somewhere in the 9.1%-9.2% range in the fourth quarter based on its aggressive cash-raising techniques. Bank of America remains one of my top holdings for this reason, and I suggest you put it on your radar.
Arch Coal (NYS: ACI)
Coal-generated energy still accounts for close to half of all electricity produced in the U.S., so the 14% drop in coal prices since August and the subsequent collapse in coal mining companies is all the more reason to be on the buying offensive. Right now my eye is on Arch Coal, which is trading at levels not seen since 2009.
Arch, which I highlighted back in June in my series of "10 Mid Caps to Rule Them All," sets itself apart from the pack with one of the quickest growth rates of the coal sector and subsequently one of the fastest-growing dividends. At a current 3.2% yield, it puts goliath CONSOL Energy (NYS: CNX) and its 1.4% yield to shame. It's hard to believe that Arch is valued at just 87% of book value while trading at a mere six times 2012's profit projections. This could be a deal too enticing to pass up.
Inhibitex (NAS: INHX)
Sing it with me, "Who let the dogs out...?!" In all seriousness, though, Tulipmania in the hepatitis C drug arena is getting out of control, and Inhibitex is taking center stage on my possible list of shorts.
Ever since Gilead Sciences (NAS: GILD) got ants in its pants and agreed to buy Pharmasset for a ridiculous premium, the market can't get enough of this sector. Worst of all, Inhibitex has sold 1.9 million shares into this rally and foolish investors keep gobbling up the shares. Data so far would indicate positive results, but at over a $1 billion market cap, I want to see a drug before I commit any money behind this stock. Those May 2012 puts are looking awfully tempting.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below and consider taking my cue by adding these three companies to your free and personalized watchlist to keep up on the latest news with each company.
Add Bank of America to your watchlist.
Add Arch Coal to your watchlist.
Add Inhibitex to your watchlist.
At the time thisarticle was published Fool contributorSean Williamsowns shares of Bank of America, but has no material interest in any other 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 nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool owns shares of Bank of America, Citigroup, and JPMorgan Chase.Motley Fool newsletter serviceshave recommended buying shares of Gilead Sciences. Try any of our Foolish newsletter servicesfree 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 adisclosure policythat believes transparency comes first.
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