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 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 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.
Youku.com (NAS: YOKU)
I believe the first words out of my mouth when Youku.com reported on Monday that it was purchasing rival Tudou Holdings (NAS: TUDO) for an absurd 150%-plus premium to its Friday closing price were, "What? Why?"
Neither company has been particularly good at putting black ink in the profit column, so perhaps they didn't get the memo that two wrongs don't make a right. Youku's impressive quarterly sales growth of 103% was shown up by the company's 108% increase in expenses. For Tudou, which is far from profitable, its fourth-quarter results highlighted a 70% jump in sales, which was fully eclipsed by a 118% rise in costs. I fully understand the two trying to realize ad sale cost-savings, but between the premium paid for Tudou and the lack of profitability, this deal has me saying "Yucko" and "Tudou-lou!"
Rite Aid (NYS: RAD)
I have to give credit where credit is due: Rite Aid has strung together a few good months of same-store sales growth in a row. I will stand by my assessment, however, that it doesn't stand a chance of competing against peers Walgreen and CVS Caremark as long as it keeps posting losses.
Investors seem to be a bit giddy about Rite Aid's 3% same-store sales growth for the quarter, but they are neglecting the fact that Rite Aid hasn't turned an annual profit since 2006, has burned cash in six of the past 10 years, and operates in a business with razor-thin operating margins to begin with. That definitely isn't going to help Rite Aid cope with its $6.3 billion in long-term debt. It's worth keeping an eye on to see if a turnaround ever materializes, but until I see some profits, I'm sticking with my CAPScall of underperform.
Starbucks (NAS: SBUX)
The morning cup of joe looks like it might come with an accompanying television advertising campaign if you live in Europe, the Middle East, or Africa. The coffee behemoth unveiled a new advertising campaign this week to spread its brand image even further. This is a stark contrast from years past, during which Starbucks has predominantly avoided advertising on television and relied on word-of-mouth to drive sales. In fact, Starbucks' advertising budget fell 20% to $141 million in 2012.
This could mean bad news for Starbucks' competitors, which seem destined to be a distant second behind the king bean. Just last week, Starbucks dropped a bombshell on Green Mountain Coffee Roasters (NAS: GMCR) , the maker of the Keurig single-brew coffee system and K-Cups, that it would be manufacturing its own single-serve coffee machine, the Verismo. Currently, these two have a K-Cup partnership as of last March, but with the Verismo in the picture, who knows how long that might last. Starbucks just doesn't look like it can be stopped.
Is my bullishness or bearishness misplaced? Share your thoughts in the comments section below, and consider following my cue by using the links below to add these three companies to your free, personalized watchlist to keep up on the latest news with each company.
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At the time thisarticle was published 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 Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks and Green Mountain Coffee Roasters, writing covered calls on Starbucks, and creating a lurking gator position in Green Mountain Coffee Roasters. 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.
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