1 Stock to Buy in April
As we do each month, we asked 10 of our top analysts across various sectors for one stock that looks especially compelling right now. Here are the companies they singled out.
Dan Caplinger: My stock for the month is Chinese online-search giant Baidu . I've been a big fan of emerging markets for a long time, and China in particular intrigues me because of the language and cultural differences that provide such a big barrier to entry in many industries. Although fast-food giants and other consumer-facing U.S. companies have done a good job of building a big presence in the nation, Baidu has managed to fend off Google and retain a commanding share of the online search market. The stock's recent plunge in reaction to up-and-comer Qihoo 360 seems far too overblown, especially given the potential for huge growth in the search market in China and in neighboring countries that will leave room for multiple competitors in the space.
Moreover, investors are forgetting that Baidu has expansion plans beyond China, and its prospects for picking up market share in other lucrative emerging Internet markets look bright. Best of all, even if its lightning-fast growth pace slows, being able to pick up shares at a trailing multiple below 20 is a bargain that's too tempting to resist.
John Maxfield: Apple
If I were the world's most interesting man (which I most certainly am not) here's how I'd sum up my selection of Apple as the one stock to buy in April: I don't usually buy technology stocks, but when I do they're dirt cheap.
Apple is patently, even offensively, inexpensive. It went from over $700 per share last September -- at which point even seasoned investors like David Einhorn were predicting it'd be the "first trillion-dollar company" -- down to roughly $420 earlier this month. It's the classic case of mania followed by utter despair.
On a valuation basis, the company's stock trades for a little more than 10 times its estimated future earnings over the next 12 months. If you exclude its obscene cash hoard, that figure falls to roughly seven times earnings. And even more telling is its 2.3% dividend yield, which is bound to increase, given that Apple is in "serious discussions" about returning more capital to shareholders.
While I've been wrong before, and will be again, I've personally bought Apple at three different price points during its descent, and couldn't be happier with the decision.
Keith Speights:Biogen Idec is on a roll that I don't see stopping anytime soon. Shares are up more than 40% during the last year. The biotech currently stands as the leader in the multiple sclerosis market with blockbuster drugs such as Avonex and Tysabri. Many expect Biogen's Tecfidera, which was recently approved by the FDA, to exceed the success of both of those drugs and become the top-selling MS drug within the next few years.
The excitement over Tecfidera stems from several important advantages for the drug. Most treatments for MS are taken via injection, which can be inconvenient and sometimes results in inflammation around the injection site. Tecfidera is a pill and therefore avoids these drawbacks. There are other MS pills available -- Novartis' Gilenya and Sanofi's Aubagio, but Tecfidera's better safety profile and solid efficacy should catapult it ahead of both of these rival drugs.
While multiple sclerosis is definitely Biogen's strongest niche, the company isn't entirely dependent on one therapeutic area. Rituxan, which generated $1.1 billion in sales last year, targets treatment of several indications including non-Hodgkin's lymphoma, leukemia, and rheumatoid arthritis. The FDA also recently accepted the company's Biologic License Application (BLA) for a new hemophilia therapy. These products, combined with Biogen's increasingly strong MS portfolio, should help the stock continue its winning ways.
Tim Beyers: No less than Steven Spielberg -- STEVEN SPIELBERG! -- helped sell J.J. Abrams on taking Star Wars Episode VII, the director revealed in a recent interview with Empire magazine. Combine serious resources, serious talent, and serious brand and you might have the next $2 billion flick under development right now, only the third in history. In the meanwhile, Iron Man 3 shows up in May as the Marvel franchise continues to expand. All of it bodes well for Walt Disney, which has also hinted at plans to bring the Star Wars universe to a new theme park.
Matt DiLallo: Despite roots that go all the way back to the days of Standard Oil, the most intriguing aspect of Buckeye Partners is its future. While on the surface the company appears to just be another master limited partnership, the difference here is that the company has mixed in some international flavor to spice up its business mix.
The foundation of that international business is the company's crown jewel: the BORCO marine terminal in the Bahamas. The facility has a very strategic location in the Caribbean and unlike other locations it has the advanced marine infrastructure required for deepwater access. This gives BORCO an unmatched competitive advantage in two key growth areas. First, it can serve as a bunkering area for crude oil transportation through the soon-to-be-expanded Panama Canal and second, it has the potential to be a staging area for crude oil from Latin American production that's expected to come online over the next decade.
Buckeye is in the process of expanding BORCO by 20%, however, it has the room to double capacity as these two catalysts play out. When you combine this with the growth of its domestic operations, you can see a real catalyst for higher future distributions. Even better, Buckeye's units already yield almost 7%, so you'll be paid quite well as you watch these catalysts play out.
Supplemental insurance giant Aflac looks like a stock worth buying in April. Investors are rewarded with a 2.7% yield on a dividend that has risen annually for 30 consecutive years. That makes Aflac a company in the business of managing risks that knows the importance of directly rewarding investors for the risks they're taking in owning the stock.
Aflac is well-known in the U.S. for the injury-prone duck that serves as its mascot, and it's also the largest writer of individual insurance policies in Japan. To showcase just how committed to its dividend Aflac has been, note that the 30-year history of increasing dividends included 2011, the year of the tsunami-induced Fukushima Daiichi nuclear meltdown in Japan. That commitment, along with a mere 22% payout ratio, gives plenty of reason to believe Aflac could continue to increase its dividend.
In spite of that strong base, Aflac's shares are down since it provided guidance in early February that raised concerns that currency conversions from a weaker Japanese yen would hurt earnings. That weakness gives investors an attractive buy-in price below eight times forward earnings estimates. Since the stock's weakness is driven by the ever-fickle currency market, there's no telling how quickly that window of opportunity may close, especially if currency traders sour on the U.S. dollar.
Anders Bylund:TIBCO Software is an unassailable giant in a booming niche market. And you can buy it today at drool-inducing prices.
The company rules the roost for real-time data analysis tools, to the point where larger and richer rivals have switched sales tactics in this sector. IBM and Oracle no longer even attempt to win contracts against TIBCO on technical merits or even with huge discounts, according to CEO Vivek Ranadive. Instead, they argue that integrated packages with everything from one vendor surely beat specialized products in terms of product support and simple setup.
The company should be having the time of its life in that sales environment, but lingering issues with sales execution have put a lid on short-term revenue growth. That's why the stock has traded down 25% over the last year.
I believe it's only a matter of time until Ranadive hammers out the execution issues in his North American sales force, which will unlock the next level of hypergrowth for his company. I thought TIBCO was such a mouthwatering deal in early December that I bought shares for myself. You can still enjoy exactly the same deep value today.
Rich Smith: A weak consumer confidence report siphoned wind from the sails of many retail stocks earlier this week -- including my top pick for April: Abercrombie & Fitch. This, however, is good news.
Abercrombie, if you recall, got shellacked last month despite beating earnings, when the company warned of weakness in the current year. To me, though, that looked like just as big an overreaction as the one that investors gave to news of waning consumer confidence.
Here's why: With earnings growth projected to average 18% or better over the next five years, Abercrombie looks like a great bargain based on the $345 million in free cash flow it says it generated in 2012. True, that number's going down in the weaker year ahead. But the company's still targeting $300 million in FCF, which is none too shabby in its own right.
I put the company's enterprise value-to-free cash flow ratio at just about 10.0 today, which means that if Abercrombie grows only half as fast as Wall Street's expecting, the stock's still fairly priced. If it gets anywhere near its target, the stock's just an amazing bargain. It may take some time for Mr. Market to realize this, true. But Abercrombie pays us a 1.7% dividend while we wait. Try getting your bank to match that.
The country's aging electricity infrastructure means we're experiencing more power outages affecting lots of people. In 2000, there were 16 outages affecting 50,000 customers or more, according to the Department of Energy. Last year there were 77, while in 2011, there were 139. This increase has spurred more people to buy generators, helping the company achieve 26% average annual revenue growth and 29% average annual net income growth over the past three years.
Jason Moser: This year marks Chipotle Mexican Grill's 20th anniversary and with more than 1,400 restaurants serving almost 1 million customers daily, it's safe to say the concept has caught on. I love the fact that the company owns all its stores; it doesn't franchise any of them. What this means for investors is strategic growth based on management's goals.
These stores are not only self-funding but also veritable cash machines with each ringing up more than $2 million in average annual sales, and when we consider that the average store yields an operating profit of around $570,000 per year (and growing), it's not hard to see why Chipotle makes for an attractive long-term holding. Initiatives like the ShopHouse Southeast Asian Kitchen and the recently announced catering service offer up additional growth drivers beyond expanding the current store footprint (which I believe has room to at least double) meaning that today's price at around 30 times full-year estimates is a fair one to own shares in an excellent company.
The biggest risk on the horizon for Chipotle is food costs. Management does possess some pricing power thanks to the quality of the food and experience, but they don't have a history of abusing it. Best of all, we know that with Chipotle and its streamlined store concept, for founder and co-CEO Steve Ells it always has been and always will be about the food. Ells has developed a platform with which he can deliver an excellent product. But for investors to look at Chipotle as "just a burrito joint" is extremely short-sighted. This story has a long way to go.
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The article 1 Stock to Buy in April originally appeared on Fool.com.Anand Chokkavelu, CFA organized this roundtable and owns shares of Apple and Walt Disney. The Motley Fool recommends Aflac, Apple, Baidu, Chipotle Mexican Grill, Google, Tibco Software, and Walt Disney. The Motley Fool owns shares of Apple, Baidu, Chipotle Mexican Grill, Generac Holdings, Google, International Business Machines., Oracle., and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
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