Dream Stocks for Value Investors

Investors are always hunting for the next big stock -- the dream stock whose price increases several times over when the market finally discovers it. It's easy to look back and discover the 10 best stocks of the past decade. But I'm more interested in the tools that can help me evaluate tomorrow's greatest companies.

Motley Fool CAPS offers a variety of resources to aid Fools in finding tomorrow's leaders. Our 170,000-member community is full of investors helping each other beat the market.

We'll enlist CAPS to screen for value stocks, then get the story behind some of its more highly rated companies. CAPS' nifty screener will help us find stocks with:

  • A market cap of at least $1 billion.
  • A long term debt-to-equity ratio of less than 0.5.
  • A current ratio of at least 1.
  • A price-to-earnings ratio of less than 15.

Then we'll tap the collective intelligence of our CAPS members to see whether these companies present real opportunities -- or if the numbers fail to tell the true story.

Opinions with the numbers
Below is a sample of stocks our screen returned.

Company

P/E Ratio

LT Debt-to-Equity Ratio

CAPS Rating (out of 5)

Corning (NYSE: GLW  )

8.1

0.11

*****

ConocoPhillips (NYSE: COP  )

9.2

0.43

*****

Hewlett-Packard (NYSE: HPQ  )

10.6

0.32

****

Data and star rankings from CAPS as of Sept. 10.

Corning
Corning is looking to overcome some of the concerns of weak consumer spending in the current economy and sees strong growth opportunities in the LCD glass market, in which it holds an almost two-thirds market share. The growth in popularity of LCD TVs is increasing in emerging markets, a trend echoed by sales results in peer 3M's (NYSE: MMM  ) display segment, and China is expected to soon become the top dog. Much of the focus for many investors is on the surging demand for Corning's Gorilla Glass, which is benefiting from its use in mobile devices and making its way into TVs and thin-film solar applications. Corning is beefing up its capacity on strong demand for its products, and CAPS members like the potential for profit even in a jittery global economy. In CAPS, 97% of the 3,611 members rating Corning expect it to outperform the broader market.

ConocoPhillips
Even though Warren Buffett's Berkshire Hathaway (NYSE: BRK-B  ) has been decreasing its stake in ConocoPhillips following its ill-timed purchase of shares near peak oil prices, CAPS members remain largely bullish on the future of the company. ConocoPhillips joined many of its big oil peers in reporting sizeable profits in the second quarter amid rising oil prices and improving refining margins. And the company is making moves to divest some assets and restructure its balance sheet to operate under a slimmer profile. At this point, a solid majority of CAPS members are finding shares attractive, with 97% of the 5,313 members rating the stock believing it to beat the S&P.

Hewlett-Packard
HP's recent buying spree that includes hefty premiums for 3Par (NYSE: PAR  ) and ArcSight is raising serious questions about the price the company is willing to pay for growth in new places. Regardless, some investors are willing to overlook these details and instead focus on its increasing position in the hot storage and network security markets. Competitor EMC (NYSE: EMC  ) , which competes in both markets, signaled continuing strength with its increased full-year guidance and record second-quarter revenue, and research firm IDC reported strong second-quarter storage industry revenue growth. Many CAPS members seem to approve of the direction HP is headed as its rating recently moved up a notch to four-star status. Overall, about 93% of the 3,323 CAPS members rating HP are bullish on its chances to outpace the market average.

Let 170,000 members be the jury
The collective wisdom of a huge pool of investors can help give context to a page of numbers from a stock screen. But individual investors are still the best judges of what to do with their own money. Fools should always perform their own due diligence.

Happily, it's easy to chime in with your own opinion. If you agree that these companies present dream opportunities -- or see more of a nightmare instead -- simply scroll down and add your thoughts in the comments box.

The Motley Fool Stock Advisor service looks for companies with strong management poised to beat the market over the long haul. To see all the stocks that have helped Tom and David Gardner beat the market by 65 points on average, take a free 30-day trial.

Fool contributor Dave Mock dreams of stocks and sugarplum fairies, but not together. He owns shares of 3M. Chesapeake Energy is an Inside Value pick. NYSE Euronext is a Rule Breakers recommendation. Total S.A. is an Income Investor pick. The Fool owns shares of Chesapeake Energy and ExxonMobil.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Fool's disclosure policy screens the good, the bad and the ugly.


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