America's Next Top Value Stock

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

The truth is that, although the market isn’t as efficient as some university professors may want to tell you, it generally does a pretty good job of 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 you're putting a true value stock in your portfolio.

Fortunately for us, in the search for stock-market values, we have the 110,000-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 less than twice their book value -- a measure typically used by value investors.

Company

Book Value Multiple

1-Year Stock Performance

CAPS Rating (out of 5)

AU Optronics (NYSE: AUO  )

1.1

(21%)

*****

Toyota (NYSE: TM  )

1.3

(28%)

****

Chico's FAS (NYSE: CHS  )

1.1

(78%)

**

Lehman Brothers (NYSE: LEH  )

0.5

(80%)

*

Ambac Financial (NYSE: ABK  )

0.5

(98%)

*

Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of July 11.

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

Not quite walking the walk on the stock runway
Bear Stearns' death spiral and subsequent sale to JPMorgan Chase (NYSE: JPM  ) may make it the poster child for the credit crunch, but there's little doubt that Lehman Brothers and Ambac are vying for position in the annals of history, too. Lehman Brothers has taken its lumps in much the same way as Bear -- high leverage, questionable securities, and a reliance on an ever-increasing housing market. Ambac, meanwhile, was brought down by its willingness to offer insurance protection for some of the most questionable debt paper out there.

As their one-star ratings suggest, the CAPS community is steering well clear of both these stocks, despite their huge declines and low trading multiples.

Chico's may have more fans than Ambac or Lehman, but it’s attracted enough bearish players to stick it with a less-than-appealing two-star rating. Why the pessimism? Savvytrader88 summed it up back in March:

The declining economy "trumps" all else, including stock value and P/E Ratios. More specifically, consumer spending (2/3rds of GDP) will continue to erode significantly in tandem with the financial/credit markets. Retailers have yet to feel the pain, which will be most evident during the second and third quarters.

Down to the final two
Car manufacturers may be hurting, but the CAPS community thinks Toyota will come out smelling like a rose. Though it hasn't fared as well recently as fellow Japanese company Honda, it is worlds ahead of the struggling U.S. manufacturers like Ford (NYSE: F  ) and GM. And as long as gas prices stay high, Toyota's category-killing Prius will continue to be a major boon for the company.

Prius or not, though, Taiwan's AU Optronics has won the hearts of CAPS investors this week. The why is simple: AU Optronics -- which manufactures LCD panels that go into gear like LCD TVs, digital cameras, and navigation systems -- is very profitable, has been growing like a weed, and has a bargain-basement stock price. Wallypk1 is one of the 400-plus AU Optronics fans on CAPS, and gave the stock a thumbs-up last month:

I don't find a good reason, other than present market conditions for the stock to be this low and with reasonably low downside risk, I believe that improving stock market conditions should see this stock double in price or better.

Make your vote count!
Do you agree that America's next top value stock may not be an American 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.

More CAPS-lovin' Foolishness:

JPMorgan is a Motley Fool Income Investor recommendation. Try any of our Foolish newsletters today, free for 30 days

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool’s disclosure policy tried its hand at modeling for a while, but it couldn't turn left and didn't have Blue Steel to fall back on.


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 684335, ~/Articles/ArticleHandler.aspx, 9/18/2014 3:47:47 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement