Though value investors have been some of the most successful investors out there, finding good stocks at bargain prices is far from easy. Though markets aren't as efficient as some university professors may want to tell you, they generally do a pretty good job pricing stocks. So while there are good deals out there, you're going to have to break a bit of a mental sweat if you want to make sure that you're investing in the stock equivalent of Johnny Depp, not Kato Kaelin.
Fortunately for us, in the search for stock market values, we have the 120,000-plus members of The Motley Fool's CAPS community voting on which stocks are true stars and which are just posers. To gather some ideas, I've dug up a handful of companies valued at less than twice their book value -- a measure often used by value investors.
|
Company
|
Book Value Multiple
|
1-Year Stock Performance
|
CAPS Rating (out of 5)
|
|
PMI Group (NYSE: PMI)
|
0.1
|
(87%)
|
*
|
|
SunTrust Banks (NYSE: STI)
|
0.5
|
(66%)
|
*
|
|
UBS (NYSE: UBS)
|
0.7
|
(78%)
|
*
|
|
Vodafone (NYSE: VOD)
|
0.8
|
(55%)
|
****
|
|
Sasol (NYSE: SSL)
|
1.9
|
(57%)
|
*****
|
Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of Nov. 21.
As you can see, though these stocks all carry value-like multiples, the CAPS community obviously doesn’t think all of them are worthy of your investment dollars.
No twinkle in these stars
Investors can't be blamed if they don’t trust the book values of financial companies like PMI, SunTrust, and UBS. All year, companies from a variety of industries have proven that a book value is only as good as the company behind it. Continued losses from Ford's (NYSE: F) operations, for example, have turned its book value negative. Similarly, a massive $29 billion third-quarter loss decimated Fannie Mae's (NYSE: FNM) book value. Though its balance sheet still shows a positive book value, that's thanks entirely to a big capital injection from the government -- for equity investors, there's little if anything left.
So it stands to reason that PMI and UBS, which have produced $750 million and nearly $10 billion respectively in losses so far this year, may see their book values come down further. While SunTrust hasn't been in the same boat as PMI and UBS thus far, the stock's valuation and its one-star CAPS rating show that investors are expecting losses to be right around the corner.
A (fifth) star is born!
Vodafone's communication services are a far cry from the financial concerns of the low-rated stocks above, and that's helped the company weather the global slowdown so far. Though operating profit for the six months ended in September was down from the prior year, this was substantially thanks to a big impairment loss on the company's Turkey operations. Even with that writedown, though, the company is still solidly profitable, and its book value seems pretty solid as well.
As interesting as Vodafone is, CAPS members have given an even warmer reception to South African oil and gas giant Sasol. Sasol, like many other oil and gas companies, had been going gangbusters for the first six months of this year. The stock has gotten mashed more recently, though, as the price of oil has fallen fast and hard. That hasn't stopped CAPS players, though; of the 1,603 members who have rated the stock, 99% have rated it an outperformer. Included in this group is Theresewin, who recently gave Sasol a thumbs-up:
[Sasol] has some excellent technology in place for both coal and gas to liquids...make take a little time to regain its steam but a very solid business base and I am putting real money into this one slowly...
Make your vote count!
Do you agree that Sasol could be America's next top value stock? Click over to CAPS and let the rest of the community know what you think. And while you're there, you can log your vote for the other stocks that you think should be in the running.
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