Although value investors have been some of the market's greatest successes, finding good stocks at bargain prices is far from easy. Markets aren't as efficient as some university professors may tell you, but 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, rather than Kato Kaelin.
Fortunately for us, in the search for stock market values, we have the 135,000 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. Below is a selection of companies that fall into this category. (You can run the same screen that I did on the CAPS screener.)
|
Company
|
Book Value Multiple
|
1-Year Stock Performance
|
CAPS Rating (Out of 5)
|
|
PNC Financial Services (NYSE: PNC )
|
1.0
|
(39.0%)
|
**
|
|
MetLife (NYSE: MET )
|
1.0
|
(23.9%)
|
**
|
|
Toyota Motor (NYSE: TM )
|
1.2
|
(2.2%)
|
***
|
|
United States Steel (NYSE: X )
|
1.3
|
(67.8%)
|
****
|
|
Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B )
|
1.4
|
(11.8%)
|
*****
|
Source: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of Aug. 21.
As you can see by their star ratings, though these stocks all carry value-like multiples, the CAPS community doesn't think that all are worthy of your investment dollars.
No twinkle in these stars
The banking industry is about as popular as Kim Jong-Il -- at least if you ask the CAPS community. Sure, a few banks, like US Bancorp (NYSE: USB ) , have received high marks from the community, but most of the major banks are limping along with a two-star rating, similar to PNC.
MetLife may not be a bank, but its investment choices have won it enough detractors on CAPS that it carries a lowly two stars. And as for Toyota, it may be no General Motors, but its three-star CAPS rating keeps it well out of the running for the top value stock title.
A five-star is born!
You wouldn't think that there'd be much interest in a company that reported a $392 million loss in the second quarter and expects another loss in the upcoming quarter. But the CAPS community has taken a liking to U.S. Steel. Perhaps it's the stock's low valuation, or the signs of improvement that management noted. Either way, members have given the stock 1,849 outperform ratings, compared with just 134 underperforms.
However, its four-star rating wasn't quite enough to put U.S. Steel in this week's top spot.
So who snagged the coveted top value stock crown this week? None other than Berkshire Hathaway. CAPS members may not have much love for the MetLife, but Berkshire Hathaway -- which is primarily driven by insurance -- has garnered the CAPS community's top rating.
Of course there's much more to Berkshire Hathaway than its insurance operations. Chief among its notable assets is its chief -- Warren Buffett. CAPS All-Star dbhealy became one of the many Berkshire bulls back in August 2007:
When the market is down, the Oracle of Omaha always manages to find a bargain. The recent downturn has presented some unbelievable opportunities to get in cheap on fundamentally sound companies. No doubt Buffett and Munger have been anticipating this for awhile, and won't miss the boat!!
Make your vote count!
I've already given Berkshire Hathaway an outperform rating in my CAPS portfolio, and I want to know what you think? Do you agree that Berkshire could be America's next top value stock? Click over to CAPS and let the rest of the community know what you think. While you're there, log your vote for the other stocks that you think should be in the running.
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