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.
Dan Caplinger: My stock for the month is Greenbrier (NYSE:GBX), a small company that focuses on selling and leasing various types of railcars for the railroad industry. Railroads have done exceedingly well in the past several years, as high fuel costs made it much more efficient to transport commodities over long distances by rail. The rise in commodity demand that we saw in the mid-2000s also bolstered the industry, and when railroads needed more railcars to meet their customers' demand, they turned to Greenbrier.
More recently, a slowdown in demand for many commodities, especially coal, has hurt railroad shipping volume. But in order to replace lost coal volume, several railroads have turned to transporting crude oil by rail, helping to serve hard-to-reach areas for which pipeline capacity is insufficient. That in turn has forced railroad companies to obtain tank cars for oil transport, and Greenbrier has been able to meet those needs as well. Given the high price of oil, the rising production from unconventional energy plays in locations that railroads are best enabled to serve, and the relative lack of strong competition, Greenbrier should have plenty of room to grow in helping the railroad industry address its own customers' shipping requirements.
Justin Loiseau: Utility NextEra Energy (NYSE:NEE) beat earnings expectations again this month -- and it's not a fluke. Although NextEra is the nation's largest producer of renewable energies, its operations run like a well-oiled machine. The company's Florida-regulated utility keeps pulling in cash, while its generation division continues to expand and diversify. The company has capitalized on production tax credits to boost its wind capacity past 10,000 net MW, but it's also modernizing nuclear projects and adding on to natural gas. In July, NextEra announced a $3 billion joint venture with Spectra Energy to bring Florida its third major natural gas pipeline. The company's stock is priced at a premium to competitors (up 21% over the last 12 months), and its relatively low 3.1% dividend yield has many income investors unenthused. But with formidable fundamentals and 5% to 7% annual EPS growth estimated for the foreseeable future, NextEra's still got room to rise.
Maxx Chatsko: Monsanto (NYSE: MON) is surely a controversial company, but the recent slide below $100 per share could be a buying opportunity for long-term investors. Full-year earnings are expected to grow more than 20% in 2013 and by double digits in 2014, demonstrating that the company still has future growth opportunities ahead of it. In fact, the company expects to sell a record volume of corn seeds in its 2013 fiscal year, which would be the third consecutive record year.
While seed sales are down a bit year over year so far, recent expansion into quickly growing -- and incredibly fertile -- South American countries has been accelerating. A recent decision should also boost sales of Roundup in the United States, which grew 24% for the first nine months of the current fiscal year. Monsanto may receive an unfair amount of criticism for its business (ever hear anyone lament Syngenta, DuPont, or Bayer GMO products?), but the fundamentals from an investing point of view remain enticing.
Matt DiLallo: This month I am going back to the well, so to speak, and picking Nuverra Environmental Solutions (NYSE: NES). Back in March I had gone with what was then known as Heckmann. A name change and a roller-coaster ride later, and I think the stock is even more compelling than before.
For those not familiar with the company, Nuverra provides environmental services to oil and gas companies, particularly surrounding the water used in fracking. Its core business is to treat and recycle water produced during the fracking process. Thought of another way, Nuverra is the company that's working to clean up the image of fracking.
The problem lately is that the company just can't seem to catch a break. Its Bakken business has been hit by bad weather, which slowed growth. Meanwhile, its operations in the Marcellus and Utica grew faster than it could handle, forcing Nuverra to subcontract a lot of work, which hit margins. To top things off, the company is having issues in the Eagle Ford causing it to revamp the management team.
All that said, Nuverra is in the right place at the right time to really enhance the growth of U.S. energy production. Its focus on water is of critical importance to the industry and its recent deal with Halliburton focusing on on-site water recycling could be an industry game-changer. These factors taken together, Nuverra is a very compelling opportunity, made even more intriguing as its recent missteps have put the company's stock in the bargain bin.
Keith Speights: If you can handle high volatility, Questcor Pharmaceuticals (NASDAQ: QCOR) looks to be a good pick for August. While there have been plenty of heart-stopping ups and downs along the way, Questcor ranks as one of the three best-performing biotech stocks over the past decade. The company's success stems from positioning Acthar, a drug first developed in the 1950s, as a treatment for diseases including infantile spasms, nephrotic syndrome, and multiple sclerosis.
Questcor reported year-over-year revenue growth of 64% in the second quarter. Earnings for the quarter nearly doubled compared to the same period in 2012. Questcor's shares jumped more than 18% the day after those results were announced, and are now up around 100% year to date.
Even with these huge gains, the stock appears to have plenty of room to run. Analysts surveyed by Thomson Reuters expect earnings growth to average 26% annually over the next few years. I think that growth should be achievable as Questcor continues to expand by marketing Acthar for new indications.
Questcor's trailing and forward price-to-earnings multiples currently stand at 18.9 and 12.6, respectively. The stock looks inexpensive considering the strong growth prospects. And, unlike most biotechs, Questcor sports a nice dividend yield of 2%.
What's the downside? That aforementioned volatility. There are plenty of short-sellers who think that Acthar's growth is unsustainable. My view is that they're wrong, but buying Questcor shares could treat investors to a bumpy ride.
Jay Jenkins: This month I recommend taking a good long look at Citigroup (NYSE:C). Citi took a beating during the financial crisis, falling from a high of more than $200 in 2008 to just above $10 in 2009. More recently, the stock has rebounded strongly, doubling over the past 12 months to around $50 as of this writing. I think this run is just the beginning. Among the four U.S. mega banks, Citigroup is by far the most international, which over the next 20 years should be a major advantage as capital flows increasingly move overseas. Citi has been vocal in its embrace of modern consumer technology, winning recognition for its mobile app, its leadership in mobile payments, and its revamped online platform. And of all the improvements at Citi over the past five years, the improvement in its capital position may be the most impressive. All in all, Citi has rebounded from past mistakes, has one of the best balance sheets on Wall Street, and is positioned for long-term competitive advantage in the future.
Sean Williams: Feel free to call me biased because it's currently the largest holding in my personal portfolio, but August is a month that's been a long time coming for shareholders of Thompson Creek Metals (NYSE: TC).
The big news that awaits in August, aside from Thompson Creek's second-quarter results, is the expected opening of the Mt. Milligan mine with its approximately 2.1 billion pounds of copper and 6 million ounces of gold reserves. The mine itself has cost about twice as much as initially planned ($1.5 billion versus initial estimates around $750 million), which necessitated Thompson Creek to sell off a 52.25% royalty stake in its gold production to Royal Gold in exchange for cash to help complete the project. The goal with Mt. Milligan is to move beyond producing just molybdenum and diversify into more stable and usable commodities like copper and gold.
Thompson Creek has taken quite the beating as spot gold prices have dropped well off their highs and molybdenum prices have dropped around 29% over the trailing year. But this is no longer a molybdenum story or even a gold story: Thompson Creek is a copper play! If you'll notice, copper has held up remarkably well compared to other metals in recent months because China and other emerging markets can't seem to get enough of the versatile metal. With Thompson Creek remaining on schedule throughout its mine build-out, I have a strong suspicion it could really surprise Wall Street over the coming years once this mine is commissioned.
Jim Gillies: Bridgepoint Education (NYSE: BPI) saw significantly reduced uncertainty in mid-July with word that its academic institution Ashford University had been granted accreditation by The Western Association of Schools and Colleges (WASC) after being denied last year. Another denial would have left Bridgepoint scrambling to relocate the bulk of its operations to the central U.S. domicile of its current accrediting body (the Higher Learning Commission, or HLC) -- and it would have had to address the academic issues that had previously led HLC to put Ashford on notice regarding accreditation. All this is important because an educator lacking accreditation cannot access Title IV funding -- the ultimate source of nearly 87% of Bridgepoint's revenue.
Thankfully, Bridgepoint's hard work and money spent over the past year addressing WASC's concerns has paid off. And now, even though the stock is up about 30% post-accreditation receipt, it's a better bargain due to that aforementioned reduction in uncertainty.
With nearly $10 per share in cash and investments, plus its continuing cash-generating ability, I estimate that Bridgepoint has generated nearly $100 million in free cash flow in the past 12 months -- while it was spending to placate WASC -- the stock simply looks too cheap. A return to enrollment growth in 2014, plus realizing even a portion of management's expected $85 million pre-tax cost reductions going forward, suggests fair value of the company lies in the mid-$20s -- substantially above today's share price in the mid-teens.
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