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.
Intel Corporation (NASDAQ:INTC)
Shares of Intel have been beaten on what seems like a regular basis since it reported its second-quarter results last month. Things got even worse last week following a downgrade from R.W. Baird, which called for weak second-half sales in Asia. But, I’m here to remind investors today that any sizable drop in Intel Corporation (NASDAQ:INTC) shares could make for a beautiful long-term buying opportunity for your portfolio or your IRA.
The knock against Intel Corporation (NASDAQ:INTC) in recent years has been its supposed lack of innovation. The proliferation of smartphones and tablets has caught Intel, metaphorically speaking, with its pants down. Instead of reaping the rewards of having approximately 85% market share in PCs, it’s been forced to spend heavily on innovative new chips for smartphones, tablets, and data center devices.
The good news is that many long-term factors are still working in Intel Corporation (NASDAQ:INTC)’s favor, even if analysts are mixed on its near-term outlook. For starters, while I like what I’m seeing from the Advanced Micro Devices, Inc. (NYSE:AMD) turnaround, it will, at the earliest, not turn an annual profit until next year. AMD is focused on building its gaming console chips, and in numerous other areas where Intel isn’t currently focused. Although the two chipmakers are often viewed as mortal enemies, they’ve predominantly moved away from much of their direct head-to-head competition, resulting in stabilizing cash flow for both companies.
Second, Intel Corporation (NASDAQ:INTC) is perfectly positioned to reap the rewards of its dominant processing market share, even if PC sales continue to slowly decline, by simply cutting processing R&D costs and funneling some of that cash into a very robust 4% yield to investors.
Finally, Intel Corporation (NASDAQ:INTC) is innovating, regardless of what Wall Street seems to think. The company’s Atom line of processors has a good shot at taking up to 10% of the tablet processing market share by 2015, in my personal estimates, while Intel’s own projections have it bringing in 30% of its revenue from cloud-based hardware by the end of the decade. This basic-needs stock is a must have for your Watchlist!
Coach, Inc. (NYSE:COH)
It’s been a rough week for a wide variety of retailers, from low-end to high-end. Wal-Mart Stores, Inc. (NYSE:WMT) shares took it on the chin after the company reported a surprise 0.3% comparable-store sales decline for the second quarter, when 0.7% growth was expected. On the higher end, Nordstrom, Inc. (NYSE:JWN), traditionally a stalwart of success in any economic environment, because it caters to a higher-income customer who often feels little pressure when spending — shows signs of weakening. Its second-quarter results released earlier this week delivered a respectable 4.4% comparable-store sales growth. This was, however, 2.4% below the 6.8% growth analysts had forecast.
Coach, Inc. (NYSE:COH), by the same standards, has struggled to improve U.S. sales in the wake of news that its CEO, Lew Frankfort, who has been instrumental in making Coach a “hip” brand that speaks to multiple income levels, plans to step aside next year. Uncertainty is never the friend of investors.
However, I think Coach, Inc. (NYSE:COH) shares are quite attractive here following the pummeling they’ve taken this month, and more than factor in any transitional weakness that may occur from Frankfort’s upcoming departure.
For one, I don’t think you can underestimate the power of the Coach, Inc. (NYSE:COH) brand. Consumers have shown incredible resilience when it comes to purchasing brand-name products, even in difficult economic environments. With a product that’s generally priced for the middle-to-upper-middle-class consumer, Coach shouldn’t have any difficulty moving its product overseas, or even domestically.
Inventory control has also been a strong point for Coach over the long run. Rather than stooping to its peers’ level and moving its inventory with discounts, Coach, Inc. (NYSE:COH) has chosen to preserve the value of its brand by selling its accessories at the marketed price. This instills a sense of brand value with consumers, and will ultimately help it boost profits quicker than its peers on potentially lower volume. At less than 13 times forward earnings, and with a yield of 2.6%, Coach’s weakness looks like an intriguing buying opportunity.