Roundtable: 1 Stock to Buy in March

We asked 10 of our top analysts for one stock that looks especially compelling right now. Here are the companies they singled out.

Jim Gillies: Three things I want to see in a great retail stock: outstanding management, a repeatable business, and a timeless brand. Coach  (NYSE: COH  ) scores three for three. Long-term management, led by CEO Lew Frankfort has built a reputation for high quality and lifetime customer satisfaction, both of which lead to repeat purchases. For women's handbags, that can cost hundreds of dollars; this positively screams brand strength

Since its 2000 IPO, the stock has risen nearly twentyfold on the back of business execution that has delivered increasing profitability, strong returns on capital, cash generation, and successful business growth. The store base has grown nearly 10% annually. The dividend, introduced in 2009, has quadrupled since its debut (and will probably rise again in 2013). Strategic share repurchases have reduced the share count by more than 20% over the past half-decade. And Coach has done all this leverage-free, and boasts $936 million cash on the balance sheet.

Frankfort is stepping up to the Chairman's seat, with the architect of the company's successful foray into the Asian luxury goods market taking the CEO reins. While I believe this transition will prove seamless, concern over the move, plus the company's own admission that 2013 will be an "investment year" has spooked shareholders. That's put Coach in the bargain bin -- but don't expect it to stay there long. The stock today is worth at least $60, even assuming muted growth going forward. Continuing their long-demonstrated excellent performance could see the stock double over the next five years.

Taylor Muckerman: Adding valuable assets through acquisitions has become a competitive advantage for Kinder Morgan over the last couple of years. This strength has led to its midstream family compiling the largest pipeline system in North America. Why is this important? Because there remains a supreme shortage in the distribution network for the crude oil and natural gas that is currently pumping out of our ground at record levels.

That's why I am focusing on Kinder Morgan Energy Partners  (NYSE: KMP  ) , the Master Limited Partnership that resides under the KMI roof. Just like its parent, it recognizes that growing its asset base will be key in the coming years. Realizing this, it decided to acquire strategically located Copano Energy, a deal scheduled to close during the third quarter of this year and be immediately accretive.

Operating in multiple key areas of production -- most notably the Eagle Ford, Woodford, and Barnett shales -- Copano's natural gas gathering and processing assets position KMP to capitalize, once natural gas prices begin to rise, leading to an uptick in production. Until that time comes -- an inevitability in my opinion -- the company's steadily growing distributions should satisfy investors' appetites for immediate income.

Anders Bylund: Rackspace Hosting is an easy choice for new money in March.

I bought shares myself near the end of February. The cloud computing veteran is chock-full of future prospects, but the stock has been saddled recently with high prices. Irrational selling on the heels of a perfectly fine earnings report added serious value to Rackspace's 19% annual earnings growth and rock-solid balance sheet.

The OpenStack cloud computing platform has emerged as a serious selling point for Rackspace's services. Moreover, it positions the company as a major provider of software solutions and support services for other players in the online services sector.

Fellow Fool John Del Vecchio worries that Rackspace's big capital expenses would destroy any serious investing thesis, but I must respectfully disagree. The company is investing heavily into its infrastructure in order to support sustained order growth for the next decade-plus. It's exactly the right thing to do, and the payoff will start to materialize later this year.

And right now, you can buy into this exciting growth stock at a 20% short-term discount. What's not to love about that?

Rich Smith: United Technologies  (NYSE: UTX  ) caught a lot of flak earlier this month, first, over reports that an engine blade produced for the Lockheed Martin F-35 Joint Strike Fighter had developed a crack, and later, over the company's admission that one of its units (Carmel Forge, located in Israel), has been caught falsifying test results on the integrity of engine parts. Yet, UTC's share price keeps going up. Why?

Because headline risk notwithstanding, the stock's a bargain -- and a good stock to buy in March. The stock costs only 16.2 times earnings, and is even cheaper valued on free cash flow. UTC is pegged for 13.6% long-term growth, and pays a 2.4% dividend. It's just notched some significant sales in its Sikorsky segment, bolstering the case for sales growth, and is busily shedding underperforming divisions to focus on its most profitable businesses.

Fairly priced today, and improving profitability rapidly, United Technologies is one great stock to buy in March.

Jason Moser: While there are a number of alternative fuel options for transportation today, natural gas accounts for more than half of all alternative fuels consumed by alternative-fueled vehicles in fleets. And Clean Energy Fuels (NASDAQ: CLNE  ) is tapping into this market opportunity in a big way.

Given the glut of natural gas resources at home (it's estimated that we have more than 90 years' worth in the U.S. alone), Clean Energy Fuels has set its sights specifically on the trucking industry, with the construction of America's Natural Gas Highway (ANGH) as well as fleet vehicles across the country. ANGH is a network of more than 150 natural gas fueling stations that will accommodate the trucking industry from coast to coast. To put this into perspective, there are an estimated 3.2 million Class 8 trucks on the road today in the U.S., which consume approximately 20,000 gallons of fuel each year. And fleet vehicles from core markets like refuse, transit, and airports are converting to natural gas, as well. For example, Clean Energy Fuels now has 37 airport stations across the country with aggressive fleet expansion throughout, including a recently completed station at Hertz's LAX property.

Investors in Clean Energy Fuels today must be prepared to deal with losses over the next year or two as the buildout continues; however, once completed, the company will hold an enviable competitive advantage. With the committed leadership of co-founders T. Boone Pickens and CEO Andrew Littlefair, Clean Energy Fuels stands to add some serious gains to your portfolio -- naturally.

Tim BeyersEvery portfolio needs a battleground stock -- a company so loved, and so equally reviled, that imperfect pricing of the underlying business is bound to occur. You know the sorts of stocks I'm talking about: Apple, Sirius XM, and my pick for this month's must-own, Tesla Motors  (NASDAQ: TSLA  ) .

I'm in Austin, Texas for the annual South By Southwest Conference, in part, to hear CEO and co-founder Elon Musk talk up the merits of his electric car manufacturer in the wake of a mixed Q4 earnings report and a high-profile fight with The New York Times. Expect bearish investors to growl at whatever bold claims he makes from the floor.

You know what? It doesn't matter. The truth is, we don't know exactly how the Tesla story will end. What we do know is that Musk personally controls nearly 24% of Tesla's shares outstanding, which means he has a lot to lose if the company fails. We also know that production is ramping up to 500 cars per week from 400 just a few months ago, while the stock trades for a little more than twice expected 2013 revenue, which is on track to quadruple. 

All that's keeping Tesla down is skepticism that an electric can take hold on a mass scale. Ford's five-fold increase in January hybrid sales -- a natural bridge between all-gas and all-electric -- suggests that these skeptics are well on their way to being proven wrong.

Dan Caplinger:  March is setting up to be an interesting month for Silver Wheaton. As a silver-streaming company, Silver Wheaton doesn't mine precious metals but, rather, offers financing to mining companies in exchange for part of their production. Although the company has focused mostly on silver streams, late last month, Silver Wheaton completed a large gold-streaming deal with Brazil's Vale to provide $1.9 billion in cash to Vale in exchange for streams from Vale's Salobo mine in Brazil, as well as its Canadian Sudbury mines. As part of the terms of that deal, though, Silver Wheaton also issued warrants that allow Vale to buy 10 million Silver Wheaton shares at any time over the next 10 years for a price of $65 per share. With the stock currently trading at less than half that price, the deal indicates confidence both within Silver Wheaton and at Vale that the silver-streamer has plenty of upside potential. Watch for more news about the Vale agreement and other potential deals in the pipeline when Silver Wheaton reports its quarterly earnings on March 22.

Brian OrelliNavidea Biopharmaceuticals looks like a good pickup in March, ahead of the Food and Drug Administration decision on the biotech's lymph node detection agent Lymphoseek. The FDA is expected to make a decision by April 30, 2013.

This isn't the first time Navidea has been in front of the firing squad. Last year, the FDA rejected Lymphoseek, but the issues seem to be limited to third-party manufacturing facilities rather than with the drug itself. Assuming Navidea's concluded correctly that its contractors have taken care of business, the diagnostic looks like it has an excellent shot at getting approved.

Despite the high likelihood of success, Navidea trades substantially below where it did before the last FDA decision. You're getting a more-likely approval for cheaper. Sounds like a good deal to me.

Investors should be careful though. If it runs up too much, I wouldn't be surprised to see the typical sell-the-launch mentality that's become rampant for small biotechs launching their first drug. Navidea could turn from a good buy in March to a good sell in April if its valuation gets out of hand.

Justin Loiseau: The world of utilities is changing fast, and NextEra Energy  is ahead of the rest. As the largest producer of renewable energy in the United States, NextEra's energy portfolio has more diversity than any other major player.

The company has had made significant inroads with cheap natural gas, and its 10,000 MW of wind investments just received another 10-year round of production tax credits to keep costs competitive.

Even as NextEra leads in innovation, its bottom line hasn't felt the squeeze. The company just beat analyst earnings estimates for Q4 2012, and its 22.9% operating margin is better than over 80% of its competitors.

Sales are slowing down for utilities, and picking progressive companies will pay off more than grabbing the biggest dividend. NextEra's below-average 3.7% yield won't win any favors with income investors, but its low payout ratio and steady cash flow should guarantee its sustainability, which is more than one can say for Atlantic Power's recently slashed 10% yield.

NextEra shares are up 24% in the past year, but the company's pricing is still reasonable if you consider the increasing importance of bottom line numbers. Give yourself a break from March Madness and electrify your earnings with NextEra today.

Matt DiLallo: As Americans, we want energy independence that doesn't cost us our beautiful environmental surroundings. We've discovered enough natural gas and oil trapped beneath our soil to give us hope that energy independence might one day be a reality. Unfortunately, it takes a whole lot of water to get it, which doesn't sit well with our environmental leanings.

That water, which is pumped down a well along with sand and chemicals, is a critical part of the fracking process we're using to unlock our vast energy potential. Let's just say that when the water returns to the surface, it's not fit for human consumption. Enter Heckmann, an environmental services company that's in the business of transporting, treating, and then recycling or properly disposing of all that frack water. While the company is growing rapidly by rolling up its competition, the market has all but disposed of its potential.

At issue, the market sees Heckman as a play on the growth of natural gas. What it's missing is that 70% of Heckmann's revenue is actually derived from liquids and oil-focused plays. It's also punishing Heckmann's growth-by-acquisition model, which has muddied its financials. However, when you clean out some of the mess, you'll see a company that's producing underlying earnings potential that will be realized as we keep on fracking. Right now, the market's judgment is clouded by these misconceptions, which allows investors buying today the opportunity to really clean up as Heckmann's market position and financial picture begin to clear up.

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Read/Post Comments (19) | Recommend This Article (131)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 08, 2013, at 12:09 PM, jwf1942 wrote:

    Have you actually been in a Coach store recently. Every mall that has both a Coach store and a Michael Kors store tells the story. Kors stores are energetic, stylish and full of customers. Coach stores are comparatively empty, the bags and accessories are staid and blah and the shoppers are not there. Kors stock is overpriced, but Coach has some catching up to do.

  • Report this Comment On March 08, 2013, at 2:18 PM, Leonard9 wrote:

    Thanks for your recommendations but NO PRICES are shown for the stocks recommended nor are the stk. symbols shown - why? Where can that be found?

    Thanks,

    Leonardrei@gmail.com

  • Report this Comment On March 08, 2013, at 6:40 PM, rccrew99 wrote:

    Could you please give us a choice between watching a video or reading the article.

    rccrew88@gmail.com

  • Report this Comment On March 08, 2013, at 6:41 PM, samedge2 wrote:

    I love the Coach brand and the stock is definitely on my watchlist. However, they DO have catching up to do. Quite a bit. And honestly, I think they're going to miss expectations again next quarter and dip even lower.

    Barring some sort of leadership or economic miracle, I can't think of many turnarounds that have taken effect in a single quarter.

  • Report this Comment On March 08, 2013, at 8:31 PM, wolfhounds wrote:

    Think long term. Coach has always revitalized it's line, and continues to do so. It's men's line is doing very well. It's Asian business continues to post strong growth. This stock, looking out 5 years not 5 minutes, is indeed dirt cheap.

  • Report this Comment On March 08, 2013, at 8:50 PM, JerzeyBoy wrote:

    I just can't get excited about Coach!

  • Report this Comment On March 09, 2013, at 1:45 AM, clbjblk wrote:

    Your Kinder Morgan is one heck of a play but they are more of a pay for the name than the actual down the road. They will always be looking over there shoulder even though Mr Duncan is not around for EPD he left them in the drivers seat. Play EPD in the long run when the export game of get rolling they will be eating a lot better , they have silently and cleanly got ready for the export NAT/LIQ/GAS WAR even if the price of foreign use drops they have that cost built in. Kinder thinks that they have the nuts in that shell but the supply from the rest of the world will hinder Kinders ego while EPD will be counting on how much to raise the divy's. Who is Asia's best friend won't matter after the contracts expire. Kinder is strong but lions get old and new oes take over the pride. It will be about 2 years or so but the benefits verses the overhead and maintaining cost will not even be close. You can eat of the floor at an EPD plant. Coach is about as safe as the currency Obama prints!

  • Report this Comment On March 09, 2013, at 3:03 PM, norm3200 wrote:

    1-one can read over 1500words par minute...but no one can listen to more than 60-90 words in a minute. Why do you still lose money in producing those verbous videos ?

    2-Could you not try to publish a parallell written text that would be at the most 1 line condensing each of the 25 lines off the so-called original writing. It could be THE HIT of the century improvment,

    Norm

  • Report this Comment On March 11, 2013, at 12:09 PM, jeff453 wrote:

    Yes, please let us read an article as opposed to having to watch a video. The vidoes are way too long.

  • Report this Comment On March 11, 2013, at 12:40 PM, buffetlunch wrote:

    AMEN to doing away with the fatuous little videos. I also recommend doing away with your policy of concealing your offer to buy into each new "cost-to-join" program which you contrive until the end of some overblown story about a sure-winner stock. It's such an old and obvious snake-oil method of getting revenue based not on the value of the program; but the revenue derived from joining. It's beneath your contrived dignity; and, unworthy of our trust.

    Buffetlunch

  • Report this Comment On March 11, 2013, at 4:30 PM, piggy60 wrote:

    I agree. The last video made me sick. It was the same voice over guy that has done several for the more notorious fradsters. I didn't become part of the Foolish family to be bludgeoned to death by "used car salesman" tactics. If you want to do a video, fine, cut the the chase and don't waste more than 3-4 minutes of my time, and don't resort to methods designed to draw in the 95% of the population that doesn't have a clue ... that isn't the type of audience we Fools ascribe too, nor do we want those types giving us advices.

  • Report this Comment On March 11, 2013, at 7:12 PM, robotstew wrote:

    I am so glad to see the comments about the verbose and wasteful videos. I agree with the commenters' perspectives wholeheartedly! Really, guys?

    If I have enough money to invest, then I DON'T have the time to waste listening to your video sillies. Get to the point, and it better be thoughtful, current, and pertinent to economic trends. (Ditch the hard-sell, no one is buying it).

    On the other hand, I really like reading roundtable discussions such as this one. What stock pros like and why. The ones who don't justify their recommendation, I just write off. If enough people buy a stock that a pro shouldn't have bought, then the price will go up so they can make their money back. BUT if they have a great reason, i.e. market segments that are changing rapidly, or plays that take advantage of political changes, etc. I love to hear their ideas and perspective.

    So, keep this sort of sharing going. Thanks.

  • Report this Comment On March 11, 2013, at 9:43 PM, XXF wrote:

    RAX is being forced down under "irrational selling"? The stock trades at 76 times earnings and competes directly against Amazon. I personally love me some good capital expenditures, but if you're investing to try to keep up with a behemoth you've got to trade at a multiple a little bit closer to earth.

  • Report this Comment On March 12, 2013, at 1:00 AM, TerryHogan wrote:

    My concern for UTX is a decline in defense spending. While the money still seems to be rolling in (particularly with the F-35) austerity budgets all over the place might eventually take a toll.

  • Report this Comment On March 12, 2013, at 11:16 AM, mikecart1 wrote:

    1 stock to buy in March became 10 haha.

  • Report this Comment On March 13, 2013, at 9:14 AM, cn13 wrote:

    Anyone have any thoughts regarding the airline industry stocks now that the cost of a barrel of oil has dropped? Several "advisers" are suggesting to buy.

  • Report this Comment On March 15, 2013, at 4:16 PM, 80 wrote:

    Re: Video watching: I feel blessed that I have a land line and cannot even watch a Fool video! I will be 80 this year and don't have that much time to waste - if you get my drift!

    78and counting

  • Report this Comment On March 24, 2013, at 11:14 PM, cherlam wrote:

    I agree with my Foolish friends. Just send an article I can read. I never play the videos--too long, too boring. And I resent having to buy into another newsletter, report, etc. just to get the hot stock pick at the end. If it is going to cost, tell me up front.

  • Report this Comment On April 04, 2013, at 4:38 PM, azukbrit wrote:

    Agree with all the comments that say

    A. Don't bore us with long videos:

    - be short and sweet, we don't have time.

    B. Tell us UP FRONT you want us to buy something,

    - so we don't have to scroll or listen to lots of boring junk.

    We ain't dumb!

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