1 Stock to Buy in May

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.

Matt DiLallo: You know that old adage investors have held near and dear for years: "Sell in May and go away." Sure, that might work some years, but as a long-term investor you can miss some real bargains if you follow that advice.

Take National Oilwell Varco , for example. The oil-field service and equipment maker is the king of its industry and boasts market share leadership to such an extent that its customers often refer to the company as "No Other Vendor." However, instead of selling at a premium, this premium business is selling at a rather inexpensive rate of less than 12 times earnings.

While its most recent quarterly earnings report brought its shares down, this company is far from being out. Its business instead should accelerate over the rest of the year as it typically lags the reports of drilling contractors and service providers, which have all been reporting stellar results.

So far this year National Oilwell Varco's stock has been sinking even as the rest of the market has gone higher. When you consider that the company just announced a new record order backlog and combine that with the growth it sees internationally, this makes it a great time to buy. So, instead of selling in May this year, consider buying shares of National Oilwell Varco and holding for the long haul.

Travis Hoium: Microsoft has been getting a hard time for the Windows 8 launch and slow sales of the Surface, but few people appreciate just how great the company's other businesses are. It now has two businesses larger than Windows -- Servers & Tools and the Business Division -- and they grew 11% and 5%, respectively, in the most recent quarter. Neither business shows any sign of slowing down, and Microsoft's smaller businesses have a lot of potential.

The Surface is growing sales at a rapid rate, the Windows 8 ecosystem is just starting to catch steam, and even Bing is taking a small amount of share in search. Windows is also generating solid profits with two-thirds of enterprise desktops on Windows 7 or 8 and revenue flat year over year. Add it all up and both revenue and earnings per share grew 8% in the most recent quarter, not bad for a company with no growth potential.

Even if you don't like Microsoft's business, you have to appreciate its value. The stock has a $273 billion market cap and the company has $74.5 billion in cash after generating $9.7 billion in cash from operations last quarter. Even before you pull out cash, the stock only trades at 10.6 times its forward earnings estimate, a great value for a company that's a better growth story than most people realize.

Jim Gillies: I avoid buying IPOs at their unveiling. They're typically overpriced, there's generally a subsequent dumping of further shares on the market, and, first-day trading jumps aside, the newness euphoria soon dissipates, and many trade significantly lower in subsequent quarters. I prefer to watch IPOs that look like they have real, growing, cash-generative businesses, run by smart people. When I find one, I watch, attempting to buy when they fall from grace.

So, meet RPX , a company with a Tony Soprano-esque business model. The company agrees not to hurt you if you pay protection money. While they term this "defensive patent aggregation," my simple descriptor isn't that far off. RPX buys up potentially problematic patents that could cost infringers legal bundles. Then, in return for "subscription fees" based on a client's financial results (the bigger you are, the more you pay), clients are granted rights to all patents in its portfolio, and moreover agree not to assert (read: scream infringement) or litigate. The client base -- 146 companies -- is a who's-who of the consumer electronics, wireless, software, and semiconductor industries.

Debuting in spring 2011 at $24, RPX was overpriced for its then-growth prospects and fell by two-thirds over the next 18 months. But management kept its eye on the long term, adding clients, buying additional patents, expanding into new products (patent risk insurance) and industries. Today, the stock trades at about 3.2 times adjusted EBITDA, and is worth at least $20. IPO fever forgotten, today's buyer gets a proven debt-free business at a great price.

Dan Caplinger: Gold stocks aren't usually a big favorite of value investors, but with the recent plunge in gold prices, I'm taking a close look at Yamana Gold . Already boasting one of the lowest-cost operational structures in the industry, Yamana has historically benefited from being able to sell not only its gold production but also the copper, zinc, and other byproduct metals that result from gold-mining operations. Yet weak gold price performance has pummeled the stock, and investors weren't pleased with Yamana's earnings report earlier this week, in which the company missed on both the top and bottom lines. In particular, weaker commodities prices across the board produced less offsetting revenue from byproduct sales, raising cash costs.

Even with its strong cost position, Yamana is responding by taking further cost-cutting measures, including better inventory management and worker layoffs. Despite the short-term pain low gold prices will bring to the entire industry, Yamana is better positioned to withstand the tough times than most of its peers, and the inevitable shakeout should leave Yamana looking better than ever and potentially give it some lucrative strategic opportunities along the way.

Brian Stoffel: Until recently, Rosetta Stone was the classic case of an excellent product being mismanaged by executives. From personal experience, I know the language-learning program can be just as, if not more, effective than traditional foreign language classes. But really, who is going to plunk down more than $650 for a bunch of CDs while walking by a kiosk in an airport or mall?

New CEO Steve Swad can see the absurdity of that strategy. He is eliminating the kiosks in favor of a more sensible move to the cloud. Under this new strategy, Rosetta Stone can offer much more enticing price points for a subscription model that can hook users -- rather than relying on one-time monster purchases. Rosetta Stone's acquisition of Livemocha also gives it the platform to offer live coaching to users, further differentiating it from competitors.

Moving forward, Rosetta Stone has an enormous opportunity in two areas. First, international clients, for whom learning English is crucial, represent a largely untapped market. And second, institutional clients -- including government organizations, businesses, and schools -- could benefit from the value proposition Rosetta offers, as it's usually cheaper than hiring and sending employees/students to foreign language classes.

Combined, these two sectors contributed only 37% of total revenue in 2012, with U.S. consumers providing the rest. If Rosetta can get even a fraction of the international and institutional markets available, this could be a huge opportunity for investors.

Tim Beyers: If history says that most stocks have trouble in May, why not grab a 2-for-1 deal? That's what Time Warner is, in effect, offering investors right now. The media giant will spin off its beleaguered magazine unit later this year, though investors may be hoping for sooner. Magazine revenue fell 5% in the most recent quarter, largely due to an 11% drop in subscriptions.

Overall revenue fell 1% but net income surged more than 27% to $0.75 a share thanks to $870 million worth of share repurchases. Film revenue declined 3.7%, but that should change soon enough. Warner Bros. reboots the 75-year-old Superman franchise in June with Henry Cavill starring as the mild-mannered superhero in Man of Steel. A series of well-received trailers has 97% of those who've weighed in at Rotten Tomatoes -- more than 81,000 at last count -- saying they want to see the film. If they're pleased, and I suspect they will be, it'll give Warner and subsidiary DC Entertainment the momentum needed to build the sort of cinematic superhero franchise that's pushed Walt Disney to new highs.

Keith Speights: Sarepta Therapeutics is a good stock for investors to consider buying in May. Let me first warn, though, that this isn't a stock for the faint-hearted. Shares dropped more than 25% in the last half of April after the FDA requested more information regarding accelerated approval for eteplirsen, an experimental drug targeting the rare disease Duchenne muscular dystrophy, or DMD.

This pullback actually presents what I think is a good buying opportunity. Sarepta reported fantastic results from a mid-stage clinical study of eteplirsen last year. The main drawback to that study, though, was that only 12 patients were included. That's a very small sample size, so there's a decent chance that the FDA won't grant accelerated approval for the drug.

If the FDA allows Sarepta to move forward with the accelerated approval process, I think eteplirsen is very likely to win approval. If that happens, this stock will go into orbit -- in another solar system. If not, shares will plunge, but that should only be temporary. Failure to gain accelerated approval will simply mean that Sarepta must conduct a late-stage clinical trial. I think eteplirsen will still gain approval ultimately.

My view is to forget about trying to time things. There's no way to know for sure what will happen with accelerated approval. I'd buy some Sarepta shares in May. I expect solid gains to come -- sooner or later.

Clean Harbors is an interesting company that does a few different things. The business operates in four segments: technical services (Hazmat and disposal); field services (environmental cleanup); industrial services (high-pressure and chemical cleaning); and oil and gas field services (exploration and directional boring services). While that may all sound extremely boring, the fact of the matter is that it operates in a market with very high economic and regulatory barriers to entry -- that's investor code for "competitive advantage." We'll want to keep an eye on its most profitable segment in technical services, which is responsible for 65% of the company's total operating profit, and while the balance sheet does carry $1.4 billion in debt versus about $240 million in cash, consistent operating earnings cover interest expense more than three times over and none of this debt (in the form of low-rate notes) even starts coming due until 2020. To top it off, my colleague Alyce Lomax has picked up shares for her TMF Real Money Portfoliotwice; a good move in my opinion. It's a solid company in a steady line of work, and at 20 times full-year estimates it's a stock worth buying today.

Chuck Saletta: Generic-drug maker Teva Pharmaceutical looks like a stock worth buying in May. Near-term expectations for the company have been dropping, which has taken its stock down in recent weeks. That price decline gives investors the opportunity to buy it for less than seven times its forward earnings estimates.

That's a decent value in and of itself, but it gets even better when combined with a decent dividend that nets American investors somewhere around a 2.77% yield (after the Israeli 15% withholding tax). The dividend has also been regularly increasing for 13 years, rewarding investors for their patience and the risks they take by investing.

As the world's largest generic-drug maker, Teva is well positioned to thrive in a cost-contained environment for health care spending, as it's already operating in a low-cost space. Also, as a generic manufacturer, it doesn't face quite the same risks from patent expirations as its branded, research-based counterparts do, though it is getting more in that research space through recent acquisitions.

All told, it's got the right combination of a decent value, a healthy dividend, and advantageous positioning in its industry to be worth owning.

Jim Mueller: Homebuilder Meritage Homes was hit hard during the Great Recession. However, when the housing bubble collapse started, longtime CEO Steve Hilton moved quickly to position the company first to survive and then prosper coming out the other side. It shored up its balance sheet by paying down debt and rolling it forward, and growing cash, and then began buying properties on the cheap. It also worked hard at squeezing out costs and changing marketing to attract buyers, as well as building energy-efficient homes -- a good selling point.

Today, with signs of housing recovering all around us, Meritage is in a much better place. Orders have grown for eight consecutive quarters, home prices are rising, and it's solidly profitable after three years of losses during the recession. Yet, despite the stock's 600%-plus gain from the bottom, the story isn't over. According to the National Association of Home Builders, single-family housing starts are barely half where they were in 2000-2003, well before the bubble hit its heights. Plus a growing number of people are entering prime home-buying age.

Meritage builds and sells homes for first-time buyers as well as families looking to move up. It will certainly benefit from continued recovery in the housing market. It took several years for us to work through the bad times in housing; I expect the better times to last for several years more, with Meritage benefiting along the way.

More compelling companies
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The article 1 Stock to Buy in May originally appeared on Fool.com.

This roundtable was organized by Anand Chokkavelu, CFA, who owns shares of Walt Disney and Rosetta Stone. The Motley Fool recommends Meritage Homes, National Oilwell Varco, Rosetta Stone, RPX, and Walt Disney. The Motley Fool owns shares of Clean Harbors, Microsoft, National Oilwell Varco, Rosetta Stone, 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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