Grab These 5 Bargain-Bin Stocks

Fool regulars may know that though I spend most of my time looking for value-priced, dividend-paying stocks that I can own for the long term, I do occasionally like to rummage around in the bargain bin to see if there are any severely beaten-down stocks worth owning.

With these stocks I'm not looking for cream-of-the-crop businesses that I want to own for years. I'm simply looking for decent businesses that are underpriced. I put a small amount of money into each and own them as a broader basket.

This search is far from idle. In my last go-round, one stock, Genworth Financial, was already part of personal portfolio, and three of the four others -- Bank of America (NYSE: BAC  ) , Hartford Financial Services (NYSE: HIG  ) , and Cemex -- have all been buys for me since I published that article.

Let's see what I've been able to come up with this time around.

Company

Market Cap

Price-to-Book-Value Multiple

Telecom Italia (NYSE: TI  )

$23.3 billion

0.56

Susquehanna Bancshares (Nasdaq: SUSQ  )

$1 billion

0.51

Stewart Information Services (NYSE: STC  )

$205 million

0.47

Audiovox (Nasdaq: VOXX  )

$175 million

0.44

Barclays (NYSE: BCS  )

$43.3 billion

0.52

Source: Capital IQ, a Standard & Poor's company.

As a country goes, so goes its major telecom provider(s). If that's not already a standard investing saying somewhere, let me suggest that it should be. Italy is among the Euro-region countries with the ugliest balance sheets, and it seems like investors have used that as a reason to flee the country's primary telecom provider. With a 40%-plus discount to book value -- though note that there is a very significant amount of goodwill on the balance sheet -- and a 6.8% dividend to boot, I think it could be worth going against the crowd here.

Susquehanna is a Pennsylvania-based bank that recently took a dive after it announced the acquisition of Tower Bancorp. Many analysts think the sell-off is overdone; Sandler O'Neill, Keefe Bruyette, and Jefferies are among the Wall Street firms to recently give shares a thumbs-up. As for me, I just think it's a not-so-bad-bank at a very-bad-bank price.

Stewart Information Services is a company I'm familiar with because I owned shares prior to the throttling it received during the housing meltdown. The company's primary business is title insurance, so you can imagine that a drastic slowdown in housing activity and a crazy upheaval of the market would affect not only Stewart's current business but also its policy losses. It's easy to guess that I didn't fare well owning the company at a book value multiple above one just as it was heading into the downturn, but with a current price tag far below that and a full 12 months of bottom-line profitability, I'm tempted to try another bite of this apple.

What can I say about Audiovox? It is a very, very OK business. It has a history of losses and its brands -- which include Audiovox, RCA, Acoustic Research, and Jensen -- aren't exactly mass-market world beaters. But the stock's price tag certainly works for me, and Fools that know their way around financial statements are sure to notice that the company typically produces a healthy amount of free cash flow. Oh, and it doesn't hurt that super-investor Seth Klarman has been a longtime investor in Audiovox.

If I'm not careful, I may start to look like a banking cheerleader. I have little interest in banging the table on a long-term position in most of the big banks, but will my interest get piqued when a major, global bank like Barclays or Bank of America trades a steep discount to book value? As Sarah Palin might say: You betcha.

Now bear in mind, as I mentioned above, I am not trying to cherry-pick single stocks here -- I buy bunches of low-valued stocks together and rely on the winners to make up for the losers over the entire basket. So before you jump in, gather your thoughts and make sure you know what your strategy is. In the meantime, go ahead and add these stocks to your watchlist so you can keep an eye on them:

The Fool owns shares of and has opened a short position on Bank of America. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer owns shares of Hartford, Genworth, Bank of America, and Cemex, but does not have a financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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  • Report this Comment On July 19, 2011, at 5:54 PM, thedubliner wrote:

    TI looks very cheap at the moment, with a P/E of 5 and a nice dividend of 5%....it is worth a little gamble! And yes, I am italian!

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