America's Next Top Value Stock

If you think finding true value in the stock market is a simple process, I've got a bridge to sell you.

The truth is that although 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 putting a true value stock in your portfolio.

Fortunately for us, in the search for stock market values, we have the 105,000-plus members of The Motley Fool's CAPS community voting on which stocks are beauties and which are just posers. To gather some ideas I've dug up a handful of companies valued at twice their book value or less -- a measure typically used by value investors.

Source: Capital IQ, Yahoo! Finance, and CAPS as of May 30.

As you can see, though these stocks all carry value-like multiples, the CAPS community obviously doesn't think that all are worthy of your investment dollars.

Walking the stock runway
It looks like there's just not enough love out there right now to make CIT, Fifth Third, or Barclays contenders for the prize.

Not surprisingly, all three of these companies are in the financial-services industry, a sector that has been one of the worst hit in the recent downturn. Though it's reasonable to expect that at some point the sector as a whole will come back, investors still have to wonder which companies will come out the other side looking like Brad Pitt, and which will have more of a Gary Busey visage.

CAPS players seem to think that CIT and Fifth Third are more likely to end up in the Busey camp. CIT, which primarily lends in the commercial market, has been hit hard by its exposure to residential and consumer lending. Now it's finding itself hard pressed for liquidity, at a time when capital is being hoarded. Fifth Third, meanwhile, is among a host of banking institutions that have found themselves under pressure from mounting loan losses and deteriorating credit quality.

Barclays has found a somewhat better reception on CAPS, but many investors are still concerned that the UK bank hasn't been as aggressive on writing down its assets as its competitors.

Down to the final two
South Korea's LG Display takes a close second place today. The company produces the LCD panels that go into electronics ranging from cell phone screens to large-screen LCD TVs. Investors have been drawn in by the dynamic market that the company is serving, as well as the expectation that LG will be boosting profits significantly over the next couple years. However, LG didn't have quite enough votes to put it ahead of the favorite of our group: Sigma Designs.

Sigma makes some nifty semiconductor chips that provide the throttle for a lot of the most exciting media applications out there today, like Blu-ray players and TV over the Internet (IPTV). The company has been growing like a weed, but it recently hit a few speed bumps that had investors running for the hills. Now many CAPS players, like All-Star TMFSarahGen, see a good opportunity to jump on Sigma while it's cheap:

[Sigma got] hit today by a miss on earnings, [revenue], and compressed margin, so that means they "only" grew by 50%. With $8 cash on hand and no debt, this looks attractive right here. Also, [Sigma] will rally into the end of year and next not only with the growth of IPTV (their biggest market) but with the rebound of the consumer which will happen -- just a question of when.

Make your vote count!
Do you agree that America's next top value stock is a leading-edge tech company? 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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