A watch list is an important tool for all types of investors. Not only can you keep up to date with the latest news regarding a company, you can also follow the share price closely and make an informed decision as to when is the best time to buy.
Although the recent volatility has made a number of stocks much more attractive, the following three stocks are still on my watch list for the time being:
1. Carsales.Com Ltd (ASX: CAR) – Australia's leading online automotive listing provider has been trading in a narrow price range for the last two years. The underlying fundamentals of Carsales.com are still strong and this is underpinned by the pricing power it commands in the Australian market. It is also growing its international footprint with investments in a number of fast growing websites in Asia and Latin America. Although they only make a small overall contribution currently, these investments are growing at double-digit rates and should provide substantial growth over the medium term.
With this in mind, it does not appear the shares will be trading out of the current range without a new catalyst. Management is anticipating revenue to remain solid throughout the second half of FY15 but net profit after tax (NPAT) will only grow more moderately. The shares are trading at around 25x FY15 earnings and I will wait for more guidance from management before buying.
2. Mayne Pharma Group Ltd (ASX: MYX) – Mayne Pharma distributes a large range of generic and patented pharmaceutical products throughout Australia and has been expanding rapidly in the much larger US market.
It has been on my watch list for the last year but I haven't been tempted to buy any shares just yet. The business is yet to prove itself a consistent performer with sales and earnings fluctuating for the past five years. First half FY15 results showed a 53% reduction in reported NPAT as problems with a distribution partner resulted in fewer sales of its US Dorxy tablets. Mayne Pharma has since decided to take full control of distributing some of its products including oxycodone, methamphetamine and Dorxy.
The results of this strategy are yet to be proven and although the share price has fallen from its highs over the last two months, I would suggest investors wait until more is known about how successful this strategy will be.
3. Sky Network Television Ltd (ASX: SKT) – Sky TV appears to be an excellent proposition for value investors. It is the sole provider of pay-tv in New Zealand, operates on healthy margins of around 24% and has a return on capital of 45%. The shares are trading at around 12x FY15 earnings and investors can expect to receive an unfranked dividend yield of around 5.5%.
Although this looks great for investors at the moment, the future success of the company in not guaranteed. Sky TV will undoubtedly face more competition from online streaming providers such as Netflix and Hulu. This will result in lower margins in order to match the much lower subscription prices offered by these providers.
Although the short-term outlook is still looking positive for Sky TV, I would be more comfortable to keep this one on my watch list until more is known about the impact of future competitors.
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