So much for scary September. With stocks rallying near the year's highs, our watchlist count dropped to the lowest number in a few months. A bit discouraging for bargain hunters but there are perhaps some signs the markets are getting close to something approaching normal.
For much of the last 2-3 years, stocks seemed to react to external factors independent of the fundamentals underlying the individual company. Of course, this phenomenon reached its zenith during the market crashes in late 2008 and early 2009 but still continued to some extent in the months following the bear market lows. Now however, stocks are moving less in unison. Even with indices near 2010 highs, a few stocks still tease at opportunity.
For instance, a new watchlist entry (revealed to EA-Premium members) seems cheap based on free cash flow analysis. While the company pays a passable, if below-average dividend, it also carries a high debt load as a result of some acquisitions to further establish a foothold in a new business segment.
Other possible opportunities reside within the watchlist, though they are less attractive due to lack of dividend and business position. If Buffett's analogy of investing as batting practice holds true, then these two stocks may be strikes but I get the sense they're hugging that outside corner — we can wait for a big fat pitch down the middle.