Though value investors have been some of the most successful investors out there, finding good stocks at bargain prices is far from easy. Though 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 investing in the stock equivalent of Johnny Depp, not Kato Kaelin.
Fortunately for us, in the search for stock market values, we have the 115,000-plus members of The Motley Fool's CAPS community voting on which stocks are true stars and which are just poseurs. To gather some ideas, I've dug up a handful of companies valued at less than twice their book value -- a measure often used by value investors.
|
Company
|
Book Value Multiple
|
1-Year Stock Performance
|
CAPS Rating
|
|
Circuit City (NYSE: CC)
|
0.2
|
(85%)
|
*
|
|
American International Group (NYSE: AIG)
|
0.7
|
(70%)
|
**
|
|
Golden Star Resources
|
0.7
|
(44%)
|
****
|
|
Motorola (NYSE: MOT)
|
1.5
|
(39%)
|
**
|
|
ViroPharma (Nasdaq: VPHM)
|
1.8
|
42%
|
*****
|
Source: Capital IQ, Yahoo! Finance, and CAPS as of Aug. 22.
As you can see, although these stocks all carry value-like multiples, the CAPS community obviously doesn't think they're all worthy of your investment dollars.
No twinkle in these stars
Circuit City is a mess. The business is hurting badly, and while it can't blame the tough economy for all of its woes, the slowdown is no friend of the struggling company. A merger with Blockbuster -- truly a match made in Wonderland -- has fallen through, and a coup by a hedge fund shareholder has now put a turnaround team in place. The stock has been rated a dismal one star on CAPS, and though archrival Best Buy (NYSE: BBY) carries just three stars, CAPS members prefer Best Buy by a wide margin.
Motorola and AIG may not be down in the dumps to the same extent as Circuit City, but they're not exactly winning the hearts of CAPS members at the moment. Though AIG isn't an investment bank, it's been looking a heck of a lot like Merrill Lynch and Lehman Brothers (NYSE: LEH) lately, as it owns up to billions of dollars of writedowns. Meanwhile, Motorola is taking its lumps as it tries to keep its head above water in a very competitive cell-phone market that's being dominated by Apple (Nasdaq: AAPL) and its flashy iPhone.
A five-star is born!
Golden Star Resources is a gold mining and exploration company that produces gold in Ghana and conducts exploration efforts in other parts of West Africa and South America. The recent downturn on commodities has taken a toll on Golden Star's stock price, but many CAPS players are convinced that this has created a buying opportunity. Among them is CAPS All-Star devoish, who said "I am buying a gold mine. [Northern Dynasty Mineral's] baby brother and in my opinion more likely to produce."
But the new, lower price for this gold miner wasn't enough for it to keep up with infectious disease specialist ViroPharma. ViroPharma only has one marketed product currently and profits have been falling lately, but CAPS members like the prospects for the company and definitely like the company's strong balance sheet and big cash hoard. CAPS All-Star MarkusV has been bullish on -- and very successful with -- ViroPharma since he rated it an outperformer in October of last year. At that time he said:
The downside potential, at this point, is close to non-existant. Their cashflow is kept healthy by their old drug sales, the valuations are as low as they can get, insiders have been buying recently. If the new drug gets approved, it's an easy double digit gain; if it doesn't, cashflow will keep the stock up anyway in the long run.
Make your vote count!
Do you agree that ViroPharma could be America's next top value stock? 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:
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