5 Top-Rated Value Stocks

Are you familiar with the dynamic duo of Fama and French? No, they didn't star in Tommy Boy -- that was Farley and Spade. And they didn't sing "Seven Nation Army" -- that was Jack and Meg White.

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 nonvalue 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 135,000 investors.

Data from CAPS; Capital IQ, a division of Standard & Poor's; and Yahoo! Finance as of June 5.

While these aren't formal recommendations, 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 AT&T.

Where is the value?
We could get really simple here and say that AT&T's value comes from its ability to attract customers and provide them with communications services. But what exactly does that mean?

Infrastructure is certainly a bit part of AT&T's picture. On the wired side of things, the company already has millions of customers connected to its service lines and continues to connect more. For obvious reasons, it's difficult for companies that don't have that connection to customers to compete with AT&T's services. At the same time, AT&T is finding ways -- such as its U-verse products -- to try and take a piece of the cable TV pie from companies like Comcast.

Infrastructure on the wireless side is no less important -- any company hoping to be competitive in the crowded wireless market is going to have to provide its customers with quality service. But while infrastructure can get AT&T customers by default on the wired side, to keep pace with wireless competitors such as Verizon (NYSE:VZ) and Sprint, AT&T has done things such as partner with Apple (NASDAQ:AAPL) to offer the hottest phones to use with its wireless services.

And as long as we're discussing AT&T's value, we certainly shouldn't leave out its brand. Though the AT&T of today isn't the monopolistic AT&T that was broken up in the 1980s, for U.S. customers the brand is certainly one of the most recognizable in the area of communications.

But will it beat the market?
More than 4,500 CAPS members have shared their opinion on AT&T's stock, and more than 94% of them have given the stock a thumbs-up. It doesn't quite earn a five-star rating, but being a four-star pick still puts AT&T in the upper echelon of stocks on CAPS.

Why such optimism? CAPS All-Star BSHumphreyII logged the most recent pitch on AT&T's stock:

This looks like a good time in the business cycle to start moving into telecom, and AT&T is the best of the big guys. The yield is nice, too, especially at this price.

Fellow All-Star starrider78 jumped on the stock last month with an eye on AT&T's fat 6.7% dividend:

AT&T is the No. 1 wireless provider and pays the highest dividend among the Dow Jones Industrials. Solid fundamentals, and just raised their dividend this year.

So what do you think? Are the stocks in this group values, or value traps? Log onto CAPS and let the rest of the 135,000-member community know what you think.

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