After suffering through a historically bad start to the year through the first half of February, patient equities investors have since been treated to a modest rebound. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average have each climbed more than 10% since hitting their 2016 lows last month. But that doesn't mean there aren't still bargains to be found. So we asked seven Motley Fool contributors to pick one stock they believe investors should buy in March. Read on to see which companies they chose and why.
Image source: The Motley Fool.
Dan Caplinger: When high-growth stocks go on sale, it can give opportunistic investors a chance that they'll rarely get. Chipotle Mexican Grill (CMG -1.34%) recently gave investors that opportunity and even after its recent recovery, the Mexican fast-casual chain's stock is still at attractive levels.
Chipotle stock got slammed late last year when reports of food-borne illness at some of its restaurant locations raised concerns about whether loyal customers would abandon Chipotle in favor of other fast-casual rivals. Yet the Mexican-food chain has worked hard to reassure its customer base that it has taken steps to address those concerns. Investors have sent the stock down sharply because past incidents at other restaurant companies have often led to years of underperformance, and in some cases, it has caused a complete failure of a business model. Chipotle admits that it will suffer aftershocks in its financials through 2016, but its long-term growth strategy remains intact. Moreover, the growth opportunities for Chipotle remain numerous, with the potential to add new store concepts and expand more aggressively in the international market. In the long run, Chipotle should be able to get through this crisis and emerge stronger, rewarding those shareholders who took advantage of the stock's decline to buy shares.
George Budwell: I've long harbored serious doubts about the small-cap biopharma Amarin Corporation plc (AMRN -1.43%), but after winning its First Amendment lawsuit against the FDA this month, the stock now looks ready to take flight. The core issue is that the FDA was attempting to block the company from discussing off-label uses of its highly refined fish-oil pill, Vascepa, with doctors based on the drug's late-stage trial in patients with moderately high triglyceride levels.
Previously, the FDA declined to approve an label expansion for Vascepa for this much larger patient population, essentially casting doubt on the drug's ability to reduce the occurrence of serious cardiovascular events. As the pill did lead to significantly lower triglyceride levels in this patient population, though, it's not exactly misleading to inform doctors of Vascepa's possible benefits for individuals with moderately high triglycerides -- which was the main issue under debate in this First Amendment lawsuit.
Cutting to the chase, Amarin's potential target market size may have just grown by a significant margin if it can persuade doctors to prescribe the drug off-label. And Wall Street seems confident that Amarin does stand a good shot at doing just that -- forecasting a healthy 53% jump in Vascepa's sales this year, followed by another 43% rise next year, according to data from S&P Global Market Intelligence.
Andres Cardenal: LinkedIn (LNKD.DL) stock crashed by nearly 60% after the company reported earnings for the fourth quarter of 2015, and it's still trading at a big discount of over 57% from its highs of the last year. I believe this huge short-term decline is providing a buying opportunity for investors in the company, so I recently capitalized on the chance and added some LinkedIn stock to my portfolio at conveniently low prices.
Image source: Wikimedia Commons.
LinkedIn reported a big 35% revenue increase for 2015, but management is expecting sales to grow between 20% and 22% in 2016, and this anticipated slowdown is the biggest reason behind all the pessimism surrounding LinkedIn. Global currency headwinds and the economic slowdown in emerging markets are hurting performance, and LinkedIn is also being more selective when it comes to investments for growth.
On the other hand, even if growth slows down, LinkedIn is well on track to consolidating its undisputed leadership position in online human resources and professional networking. The company has 414 million registered users as of the end of 2015, a strong 19% year-over-year increase. Just as important, nearly 43,000 corporations use LinkedIn's platform for their human-resources needs, a vigorous growth rate of 29% last quarter.
Internet and related technologies are profoundly transforming all kinds of industries, and human resources is no exception. LinkedIn is clearly the biggest beneficiary from this trend, and management calculates its addressable market opportunity is worth nearly $115 billion, so the company is still offering spectacular room for expansion in the years ahead.
Daniel Miller: Time Warner (TWX) has been on my watch list for a while, but it's starting to intrigue me. For one, the company owns certain rights to popular sports, including the NBA, which is increasingly important for revenue, as live shows have proved valuable for advertisers. That should benefit the company, since the NBA playoffs are around the corner, as well as the start of Major League Baseball, as we head into the spring and summer months.
Image source: Time Warner/HBO.
Another critical component for the company's bottom line is its HBO content. While the reported 800,000 subscribers to its HBO Now subscription video-on-demand platform had some describing it as weak, it was only on the market for 10 months and it could receive a near-term surge in subscribers as the insanely popular Game of Thrones launches a new season next month. Further, the company plans to increase its original programming by 50%, which could continue to increases costs and perhaps diminish margins in the near term, but the long-term payoff for HBO should be worth it for investors.
Time Warner's recent fourth quarter fell short of analyst expectations, but the company did raise its earnings guidance for 2016 from $5.25 per share to between $5.25 and $5.40. And if you flip through the company's fourth-quarter presentation, there were quite a few positive developments amid the company's turnaround.
One of the positive developments was the progress in its operations. Time Warner completed the "all digital" conversions and Internet speeds up to 300 Mbps in Austin, Dallas, and San Antonio, Texas; Kansas City, Mo.; and Raleigh and Charlotte, N.C., with other cities on the way. The company also posted a 13% decline in care calls per customer, with a 19% decline in repair-related truck rolls per customer. The company checked in with a 98% on-time percentage for customer appointments within its "industry-leading" one-hour appointment windows.
Time Warner is far from a sure thing, especially as the cord cutting trend exists, but its valuable sports programming, HBO content, and operational improvements point to a better 2016.
Todd Campbell: March means getting serious about tax time, and getting serious about tax time means that millions of people, including me, will be relying heavily on Intuit's (INTU -0.53%) top-selling QuickBooks and TurboTax software this month.
Intuit is a Goliath in small-business accounting and tax-preparation software, and because the company's revenue is split about equally between these two product lines, Intuit is in a good position to benefit from improving small-business conditions. According to Sageworks, small business' net profit margin improved to 7.5% in 2015 from 6.4% in 2014, and according to payroll company Automatic Data Processing, small-business employment is higher than at any point in the past decade.
Assuming those small-business trends boost demand for Intuit products and services, then management's transitioning of clients to profit-friendly monthly cloud subscriptions from one-off purchases of desktop software could send earnings and the company's stock price higher. In the current fiscal year, Intuit expects to grow its top line between 8% and 10% and to deliver non-GAAP EPS of between $3.45 and $3.50, up from $2.59 in FY 2015. That's a pretty solid forecast, and it could make picking up shares ahead of tax time savvy.
Jason Hall: Trex Company (TREX -0.57%) is the market leader in wood-alternative decking, commanding nearly 40% of market share, and has grown its business far faster than the industry since the end of the recession. At the same time, the company has added new products, including railing and lighting accessories, giving it a fully designed series of branded "soup to nuts" products for outdoor living spaces.
The company has also expanded into recycled polyethylene pellets and is working on customized formulations, which it will sell to companies that use poly pellets to manufacture their goods, whether it's plastic bottles, car parts, or numerous other things made from the ubiquitous material.
Last year, the company grew sales 13% and earnings per share 19%, and today, Trex's share price is pretty much where it was at the beginning of 2015. Yes, it's recovered from being down as much as 25% as recently as a few weeks ago, but it remains a dominant market leader in its industry, and a great value.
Lastly, there's a lot to like about the long-term prospects, too. Housing remains relatively strong, as do the U.S. economy and jobs market. If that remains true, Trex should make for a market-beating investment for years to come.
Image source: PayPal Holdings.
Steve Symington: On the heels of its formal separation from eBay two quarters ago -- and despite intensifying competition in its space -- digital payments platform leader PayPal Holdings (PYPL 0.34%) has never looked stronger. Most recently, PayPal saw revenue growth accelerate to 17% (to $2.6 billion) in the fourth quarter. That included one percentage point from its acquisition of Xoom, but it was primarily driven by a combination of growth in customer accounts (up 17 million year over year to 179 million), and a 25% increase in total transactions, to 1.4 billion.
And as fellow Fool Asit Sharma pointed out recently, PayPal management even ironically credited increasing competition for helping to drive growth, as consumers are turned off by an ever-increasing number of confusing digital payment options and so tend to be drawn to its widely accepted "platform and technology-agnostic" approach.
A full 56% of PayPal's customer base is now outside the United States as well, demonstrating its ability to scale its success on a global basis. And PayPal would have achieved 21% top-line growth had it not been for the negative effects of foreign currency exchange. That brought currency-neutral revenue growth to 19% for the full year, above the high end of PayPal's guidance for 15% to 18%. At the same time, PayPal is proving its business can generate plenty of cash, with cash flow from operations of $728 million, and free cash flow of $564 million in the fourth quarter alone. So it should come as no surprise that the company is putting its money where its mouth is with a new $2 billion share repurchase authorization.
Finally, looking forward, PayPal anticipates currency-neutral revenue growth of 16% to 19% for the coming year. But given its outperformance so far -- and while a deceleration from its most recent quarterly performance is understandable, growing from a larger base, I wouldn't be the least bit surprised if PayPal was once again underpromising with the intention of overdelivering. If PayPal can sustain its momentum and seize as much of its massive global opportunity as possible in these early stages of growth, I think long-term investors who buy the stock this month stand to be handsomely rewarded.
