Roundtable: 1 Stock to Buy in March


As we do each month, we asked a handful of our top analysts across sectors for one stock that looks especially compelling right now. Here are the companies they singled out.

Isaac Pino: I like to bet on companies that prove they can thrive even when their back is against the wall. SodaStream's (NASDAQ: SODA  ) been there -- its stock was cut in half during August 2011 -- and now the company has its work cut out for it again. I think it will endure.

With Coca-Cola and Green Mountain Coffee Roasters entering the ring, the pressure's mounting while SodaStream's margins are suffering. But this industry's an odd one indeed, and the negativity seems overdone. If you take a close look, SodaStream's revenue growth in its core Western Europe market remained impressive at 38% in the latest quarter. You might expect that region to be slowing, but it's quite robust for the moment. In general, it speaks to the quality and staying power of SodaStream's products, which have been prevalent in Europe for decades.

Further, SodaStream's performance overseas shows this company can really accelerate once it fully understands a given market. Tastes and deep-rooted allegiances to name brands will cause its marketing tactics to falter in different regions. So far, SodaStream's products haven't resonated as strongly in the U.S., but it's making progress.

SodaStream's stock is currently trading at 21 times forward earnings, so investors aren't expecting explosive growth anyway. At this price, even value investors like Whitney Tilson are snatching up shares. For now, SodaStream just needs to work through the fourth-quarter supply chain hiccup, and things will look bubblier in due time.

Buck Hartzell: It's a great thing when the world's best capital allocator is on sale, so you'd better take advantage when the opportunity presents itself. Berkshire Hathaway (NYSE: BRK-B  ) recently reported an increase in book value per share of 18.2% over the past year -- not too shabby for such a large entity.

Serious investors should consider purchasing Berkshire now because Berkshire is a much better bargain than the S&P 500. An investor is currently paying about 2.7 times book value to purchase the S&P 500, and less than 1.4 times book value to own Berkshire Hathaway. I'll take that bet every time.

Not only that, but investors can rest easy with their investment in Berkshire. The company possesses a fortress-like balance sheet with $42 billion in cash. And its insurance operations are unbelievably well-run, and the list of wholly owned businesses just keeps growing. In short, I think it's very unlikely that in the next five years, you'll see Berkshire underperform the S&P 500. What are you waiting for?

Brendan Mathews: Like my good friend Buck Hartzell, I believe Berkshire is a very compelling investment idea right now. The company just reported excellent results for the past year -- its operating businesses, which range from MidAmerican Energy to Dairy Queen, generated a 14% increase in pre-tax operating earnings during the year. And its investments, partially funded by float from GEICO and Berkshire's other insurance operations, increased by 13% during the year.

Based on my valuation, now looks like a good time to add shares. I value the company using the "two-column" approach endorsed by Buffett. This method involves adding investment per share and pre-tax earnings per share times a multiple. You can read all the details of my valuation in another article, but my conservative estimate of intrinsic value is $147 per "B" share. With the shares trading around $125, my intrinsic value is 18% higher than the current price. Admittedly, that's not a huge discount, but for a safe, reliable company like Berkshire, it could be a very attractive entry point.

Patrick Morris: Deciding to buy a stock based on its performance relative to the market is always a risky proposition. Yet one stock that has dramatically trailed the return of the market might be one to consider.

Over the last year, Coca-Cola (NYSE: KO  ) has watched its stock price fall by 1%, while the S&P 500 is up an astounding 20%. And Coca-Cola has underperformed the market over the past five years as well, with the benchmark delivering a total return of nearly 200% versus 130% for Coke. Despite those discouraging results, this might indicate a great opportunity for growth in the future.

The company has a lot going for it at the moment. Its price-to-earnings ratio is a very reasonable 20, and it maintains a commanding market position. Its solid dividend yield and endorsement from Buffett don't hurt, either.

However one of the things for investors to consider is the company's willingness to expand its operations. Indeed, it's likely the businesses that have propelled it over the last 100 years aren't going to be the ones that move it forward over the next 100 years.

Among the newer businesses, there are its investments in Honest Tea and Glaceau Vitaminwater, which will grow as consumers become more health-conscious. There is also its recent announcement of a global strategic partnership with Green Mountain Coffee Roasters (NASDAQ: GMCR  ) , in which Coke has taken a 10% stake in the coffee firm. Coke knows drinks high in sugar are becoming less popular. With people more willing to pay more money for healthier options, it is seeking to command those new markets as well.

When you add it all up, Coca-Cola remains a compelling investment consideration, despite its relative underperformance over the past five years.

Simon Erickson: MercadoLibre (NASDAQ: MELI  ) is offering long-term investors an incredible opportunity right now. The company runs an e-commerce site -- very similar to eBay -- that operates in 13 Latin American countries. It has grown its business incredibly quickly, with gross merchandise volume up 44%, items sold up 23%, and registered users up 22% during 2013.

However, there's a catch. Latin American currency devaluations (particularly in Argentina and Venezuela) have wreaked havoc on the financials of companies that operate in the region. As an example, MercadoLibre grew revenue 50% and earnings 58% during the fourth quarter. But those growth rates got knocked down to 30% and 35% (respectively) when converted back to U.S. dollars -- which is the currency MercadoLibre reports in. Anyone looking at the dollar figures isn't getting the full picture of this company's incredible growth.

Herein lies the opportunity. Unfavorable currency fluctuations have rained on MercadoLibre's fiesta. But they can only last for so long, and Foolish investors should recognize the long-term potential of what the company is building. The number of Internet users in Latin America is growing at 13% per year -- faster than any other global region. MercadoPago (similar to PayPal) is now used for 35% of merchandise volume -- and the company gets a cut from each transaction. Users are making MercadoLibre their go-to site for e-commerce. As eBay and Amazon have shown us stateside, that position can be extremely rewarding for shareholders.

Andres Cardenal: I like MercadoLibre as well. The company is often called "the eBay of Latin America," not only because eBay owns nearly 18% of the company, but also because both companies have similar business models. But MercadoLibre has one big advantage over eBay: It doesn't have to face the same level of aggressive pricing competition from Amazon. MercadoLibre is the undisputed e-commerce leader in the region, and it enjoys sky-high operating margins thanks to its rock-solid competitive position.

The stock is down by more than 30% over the last six months as Wall Street analysts are concerned about the possible impact of economic problems in Argentina and Venezuela. Economic headwinds could create some volatility in the coming quarters, but MercadoLIbre is proving it has what it takes to successfully sail through the storm with growing sales and earnings despite unfavorable currency fluctuations.

Justin Loiseau: It's not often I use creepy 70-year-old men on subways as part of my investment thesis. But when I saw said character hit on a 20-something and depart with the words "Facebook me," I got a real-life reminder of just how omnipresent this social network really is.

In just 10 years, Facebook (NASDAQ: FB  ) has become arguably the world's most important (or at least most addictive) communication medium. The latest data shows that 745 million people use Facebook every single day -- that's equal to 10.4% of the entire human population.

But for growth investors, what's more alluring is who is using Facebook how. Four out of five users are outside North America, making this tech stock an emerging market growth opportunity. Add on the fact that its mobile monthly active users now clock in at 945 million, and you've got yourselves an ad company with eons of information in the pockets of people in every corner of this little marble we call earth.

Almost 50% of the company's ad revenue now comes from mobile, and it just began delivering online ads directly through other mobile apps, regardless of Facebook syncability. That means this social network has caught the scent of soaring sales Google AdSense left behind -- and if future forays are anything like past ones, Facebook's not going to stop until it's gotten its own piece of the next big profit.

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Read/Post Comments (10) | Recommend This Article (46)

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 15, 2014, at 6:30 PM, stockanal45 wrote:

    " I like MercadoLibre as well. The company is often called "the eBay of Latin America,"

    Who would be dumb enough to buy something from the Latin American regions via internet? Well, besides some of these MF writers?

  • Report this Comment On March 15, 2014, at 8:13 PM, Risky88 wrote:

    I wish each of you guys would each say a different company.

    For how many good ones there are out there, there should be no need for doubling up.

    Seriously.

  • Report this Comment On March 16, 2014, at 8:26 PM, TMFBuck wrote:

    Hi Risky88,

    Ironically Brendan and I picked the same company. We submitted our articles independently and came to the same conclusion. Perhaps it's not a bad thing. I guess time will tell.

  • Report this Comment On March 17, 2014, at 3:45 AM, Risky88 wrote:

    I just feel your resources and great knowledge could be better used.

    Let's remember the main goal of the fool here

    to help inform investors

    10 people with different stocks, in my opinion can give the most information about a wider range of topics.

    One idea to note:

    Maybe do a opposite sided piece called

    1 stock to avoid this month.

    Just a idea, I certainly would enjoy reading it even if it was one I owned.

  • Report this Comment On March 17, 2014, at 10:58 AM, TMFBuck wrote:

    Good points Risky88. We usually don't lack for good ideas around here. And hey, there's always next month.

    While we focus our energy on stocks to buy, adding a feature on stocks to avoid is a nice twist.

    While this isn't the same I think every investor should know both the pros and cons about the companies they are investing in. If you want to hear both sides debated on Berkshire check out this video http://www.fool.com/investing/general/2012/07/15/bull-vs-bea...

    Fool on!

    Buck

  • Report this Comment On March 21, 2014, at 7:55 PM, Domelady wrote:

    Am I missing the location that could shed some light on why CAMP tanked today admittedly after a tough few days? Did I miss some indicating info or material on this DROP today? Thanks

  • Report this Comment On March 25, 2014, at 7:18 PM, Bilejones wrote:

    What sort of moral cripple would invest money in an apartheid based company?

  • Report this Comment On March 26, 2014, at 2:05 PM, ThinLine wrote:

    CAMP has crept down for three days and then tanked today. There is a question on the Board about it, why has MF not responded? It was MFs big pick. A little commentary is approprate now.

  • Report this Comment On April 02, 2014, at 5:55 PM, amacnyc wrote:

    I could have sworn I read an article here on TMF avoiding SodaStream due to their West Bank issues. I personally don't own the stock and was put off by the article I read. I do however own the product and love it. The CO2 expense aside, it really saves the planet with less plastic being used and thrown away. Also, I consume far more water in my diet now and can make drinks as weak or strong as I like.

    I can't imagine why anyone would NOT want one unless their kids just have to have the "real" thing.

  • Report this Comment On April 07, 2014, at 11:21 AM, Mega wrote:

    "SodaStream's stock is currently trading at 21 times forward earnings, so investors aren't expecting explosive growth anyway. At this price, even value investors like Whitney Tilson are snatching up shares."

    Tilson isn't a real value investor, he's a pretender.

    You can only buy so many momentum driven growth stocks at above market multiples before your membership card gets revoked.

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9/30/2014 4:02 PM
BRK-B $138.14 Down -0.19 -0.14%
Berkshire Hathaway CAPS Rating: *****
FB $79.04 Up +0.04 +0.05%
Facebook CAPS Rating: **
GMCR $130.13 Down -0.27 -0.21%
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GOOGL $588.41 Up +0.60 +0.10%
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KO $42.66 Up +0.41 +0.97%
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SODA $29.49 Down -0.62 -2.06%
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