Are you familiar with the dynamic duo of Fama and French? No, they didn't star in Baby Mama -- that was Fey and Poehler. And they didn't sing "Ebony and Ivory" -- that was McCartney and Wonder.
While the names Eugene Fama and Kenneth French may not come up in most dinner conversations, the two have done some very interesting academic research on stocks. In short, they've proposed that there's more to stock returns than volatility -- which was most academics' previous consensus. In research they conducted over various periods and across multiple geographic locations, Fama and French determined that stocks characterized as "value stocks" have consistently outperformed non-value stocks.
Today, I've rounded up five value stocks that are all trading at less than two times their book value (you can run the same screen on the CAPS screener). To focus on high-quality stocks, I've cross-referenced these against ratings in our CAPS community of more than 125,000 investors.
|
Book Value
|
1-Year |
CAPS Rating
|
---|---|---|---|
United States Steel |
0.5 |
(82%) |
**** |
NYSE Euronext
|
0.5 |
(74%) |
***** |
Baker Hughes |
1.3 |
(58%) |
***** |
Barrick Gold |
1.6 |
(41%) |
**** |
NVIDIA |
1.8 |
(61%) |
**** |
Data from CAPS, Capital IQ, a division of Standard & Poor's, and Yahoo! Finance as of Feb. 27.
Five years ago, Motley Fool Rule Breakers pick Intuitive Surgical
While we can't expect that all of these are going to perform like Intuitive Surgical, the CAPS community thinks that these are some good choices when it comes to value stocks. With that I mind, I thought I'd dig in a little further on NYSE Euronext.
Where is the value?
When it comes to listing as a public company, there just aren't too many games in town, and NYSE is the largest. Sure, it may seem strange to talk about public company listings right now, given that Mead Johnson Nutrition is the only IPO so far in 2009. But there will come a time -- believe it or not! -- when the global economy turns back around and companies once again start thinking about listing on public markets. In the meantime, NYSE continues to collect fees from traders who trade on the NYSE exchanges, as well as listing fees for companies that are already public on its exchanges.
It's no secret that NYSE faces stiff competition from NASDAQ OMX, not to mention derivatives-focused exchanges like CME Group
But will it beat the market?
NYSE Euronext is among the top-of-the-heap five-star stocks in the CAPS community, with a whopping 2,426 outperform ratings against just 83 underperforms. CAPS members have listed a number of reasons to like the stock, including the healthy dividend, the strong brand, and the low price. Stallis became one of the NYSE bulls early last month and laid out a pretty compelling case:
Great moat, great business model, increased volatility of late probably means more transactions, good times in the future means more investor participation (equals more transactions). I shied away from the exchanges in the past because I felt it would take too long for them to grow into their multiples but it's difficult not to like NYSE Euronext at the current price...
So what do you think? Are the stocks in this group values, or value traps? Log onto CAPS and let the rest of the 125,000 member community know what you think.
More CAPS Foolishness: