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 Brad Pitt, not Kato Kaelin.
Fortunately for us, in the search for stock market values, we have the 120,000-plus members of The Motley Fool's CAPS community voting on which stocks are true stars 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 often used by value investors.
|
Company
|
Book Value Multiple
|
1-Year Stock Performance
|
CAPS Rating
|
|
Citigroup (NYSE: C )
|
0.4
|
(77%)
|
**
|
|
Zions Bancorp
|
0.7
|
(45%)
|
*
|
|
Las Vegas Sands (NYSE: LVS )
|
0.8
|
(95%)
|
**
|
|
Frontier Oil (NYSE: FTO )
|
0.9
|
(76%)
|
*****
|
|
AT&T (NYSE: T )
|
1.5
|
(27%)
|
****
|
Source: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as of Dec. 5.
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.
No twinkle in these stars
Finance schminance is what Mr. Market has to say. Wells Fargo (NYSE: WFC ) has shown that "bank" isn't as synonymous with "write-down" as many people now think, but few other financial institutions have lived up to that standard. Citigroup, for one, certainly hasn't been anywhere close. The once-massive bank was recently seen taking a second handout from the U.S. government, designed to keep it from going under. Will that help one of the world's scariest stocks right the ship? Many CAPS players think not.
Zions Bancorp may not be as high-profile as Citigroup, or have financials that have been nearly as ugly, but most CAPS players seem to think that this bank's future will be disappointing. And as for Las Vegas Sands, it may not have to worry about mortgage defaults, but this highly indebted gaming company has been seriously feeling the pinch of its $10 billion of borrowings.
A five-star is born!
Good ol' AT&T has held onto a very respectable four-star rating from CAPS members. Is this because it's going to avoid getting squeezed during the recession? Hardly. The company's announcement of 12,000 layoffs reflects the slowdown in consumer spending that's hitting not only AT&T, but competitors Verizon (NYSE: VZ ) and Sprint, both of which have also laid off a few thousand workers. Investors have found some solace, though, in AT&T's work with Apple (Nasdaq: AAPL ) on the iPhone, the company's longer-term outlook, and its fat dividend.
But as attractive as CAPS members find AT&T, it just hasn't had the stuff to beat out this week's top value stock, Frontier Oil. Like all of the other refiners out there, Frontier got its butt kicked as oil prices soared to unbelievable highs (and gasoline prices didn't keep up), and then got its butt kicked all over again when oil prices plummeted -- and gasoline plummeted just as fast. CAPS members, however, think that now's the time to be looking at this beaten-up stock.
Back in mid-September, CAPS All-Star tumachar chimed in with these bullish thoughts: "Crude prices are down, pump prices are not down as much. I think refiners are getting some relief and should do better in this environment." More recently, CAPS member bgpr said, "Minimal debt, crack spreads increasing, giveaway priced (DOWN 75%). I cannot see us getting away from gasoline consumption in the near future."
Make your vote count!
Do you agree that Frontier Oil 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.
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