Are you someone who likes to follow the investing trends of sophisticated investors? Do you believe larger companies offer the most sustainability? If so, you may enjoy the following list of potentially undervalued mega-cap stocks.
To start, we applied the wisdom of the respected investor Benjamin Graham. Graham was a former mentor to Warren Buffett, whom he taught at Columbia Business School and is considered the "godfather of value investing."
Graham created an equation to help search for potentially undervalued stocks, and identifies what is known as the "Graham Number," or the maximum fair value for a stock. Any stock trading at a significant discount to this number is considered by the equation to be undervalued.
The Graham Number only requires two data points: current earnings per share and current book value per share. The Graham Number = Square Root of (22.5) x (TTM Earnings per Share) x (MRQ Book Value per Share). This equation assumes that a stock is overvalued if P/E is over 15 or P/BV is over 1.5.
We applied the graham equation to the largest 200 companies by market cap and took only the names deemed most undervalued.
Without further ado, here are the top 10 stocks, sorted by potential upside. Do you think these stocks are truly undervalued?
Use the list below as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
List compiled by Alexander Crawford:
4. Suncor Energy
5. Westpac Banking
6. Vodafone Group
7. PetroChina Co.
10. Time Warner
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman and Alexander Crawford do not own any of the shares mentioned above. BVPS, EPS, and insider data sourced from Yahoo! Finance, all other data sourced from Finviz.