This is a question plenty of investors ask themselves every day: "Which stock do I buy next?" The truth is, what might be the right stock for one person to buy may not be the best stock for you. We asked three of our top contributors to offer up a solid long-term stock to buy next, and they offered up three companies in very different businesses. Chances are, no matter what sort of investor you are, or what kind of company you're looking to buy next, one of them could be exactly what you're looking for.
Here's a closer look at the stocks they offered up, and why they think each one is a stock investors should buy next.
This travel giant is an ideal investment
Dan Caplinger: Summer is almost here, and that means that peak travel season is right around the corner. That's good news for online travel portal Priceline.com (BKNG -0.64%), which has built up a dominant Internet-based franchise over the past decade and has been especially effective in moving into the international arena. In addition to its namesake hotel- and travel-booking website, Priceline has made strategic acquisitions that include reservation specialist OpenTable in order to flesh out its menu of services to travelers.
Some have worried that the rise of room-sharing services like Airbnb could spell trouble for Priceline in the long run. Yet Priceline has responded with its own efforts to woo owners of vacation rentals, luring them with the prospect of tapping into Priceline's huge audience of potential customers. Moreover, hotel partners are just as interested as Priceline is in sustaining their franchises, making joint efforts likely in the future.
In addition, the strength of the U.S. dollar has held back Priceline's growth figures. Now that foreign currencies are starting to bounce back, Priceline should see easier comparisons and watch earnings and revenue increase at a more attractive pace. All in all, as travelers get set to enjoy their summer vacations, Priceline investors should expect to see the business thrive once again.
An undervalued tech titan
Tim Green: I've been a Cisco Sytems (CSCO -0.77%) shareholder since 2012, and I most recently added to my stake earlier this year when the market briefly plummeted. Even though shares of the networking hardware giant have risen about 80% over the past five years, the stock is still a great value that all investors should consider.
Cisco dominates the switching and routing markets, and the company derived about 45% of its revenue from those businesses during its latest fiscal quarter. But Cisco is far more than a simple hardware company. Services revenue is growing fast, rising by 11% year over year during the fiscal third quarter and accounting for about 26% of total revenue. Security revenue jumped 17%, and the collaboration segment, which includes video conferencing solutions, grew by 10%.
With switching and routing both being slow-growing businesses, the days of rapid revenue growth for Cisco are likely over. But the stock's valuation makes this irrelevant. Backing out the net cash on Cisco's balance sheet, which totals about $35 billion, shares of Cisco trade at less than nine times its trailing-12-month free cash flow. Even if you completely ignore that mountain of cash, the P/FCF ratio is still just 11.5. And let's not forget about the 3.6% dividend yield.
Cisco may not be the most exciting stock out there, and it certainly isn't the fastest-growing company. But it's a solid value, a rarity in the world of technology stocks.
A downtrodden yet solid oil stalwart
Jason Hall: It might seem nuts to offer up an oil stock that's already climbed nearly 22% so far in 2016 as a good buy right now, but I think it's a relatively good time to invest in shares of NOW Inc. (DNOW 0.24%), even after a strong bounce in its share price.
NOW Inc., formerly the distribution segment of National Oilwell Varco, has been a stand-alone company for just over two years now, having been spun out of NOV at what, in retrospect, was either a perfect or an awful time:
So why do I think NOW Inc. is a stock you should buy? In short, it's a pretty great business to own, and it's trading at a reasonable price today. The company, which supplies parts and accessories to the oil and gas industry, has shown a pretty substantial GAAP loss in recent quarters, but don't cause that to let you miss the company's quite solid cash flows:
Yes, some of the free cash flow growth is a product of working capital changes, but the business is in very sound condition, with essentially no debt. That puts it in a particularly good position to take advantage of the downturn and grow its market share, through acquisitions of struggling competitors potentially at a discount, while its current cash flows keep the lights on and employees paid.
Furthermore, NOW Inc.'s prospects should only get better as the oil recovery continues, as more drilling becomes needed simply to maintain current production levels. In other words, NOW Inc. doesn't need another oil boom to be a great stock; the eventuality of the oil market stabilizing alone, combined with a reasonable valuation today -- shares are around 1.5 times book value, and price to free cash flow and price to cash from operations multiples are below 5 -- should make this a market-beating stock for long-term investors.