This Top Stock Is a Winner

Valuation is an imperfect science, but as important a concept to fantasy football players as it is to investors. Ask anyone who drafted Cadillac Williams in the late rounds. Williams routinely beat Cowboys defenders in week one, picking up 97 yards and a touchdown on just 13 carries.

Value is value, whether you're assembling a fantasy team or a stock portfolio. But don't take my word for it. "Before you make any decision -- who to draft, trade, start, and sit -- make sure you are following that basic principle; how risky is this move, does it give me the best chance to win?" writes ESPN fantasy analyst Matthew Berry in his annual manifesto.

See the parallels here? Winning fantasy players pick up unloved players for less than market value, and market-beating investors buy oversold stocks for $0.50 on the dollar.

Waiver-wire heroes, unloved stocks ready to rise
Similarly, these are the investors who knew that last November's panic sellers were valuing Marvel Entertainment (NYSE: MVL  ) as if its studio was worth less than zero. Those Fools have since been rewarded.

More bargains are out there. For this weekly column -- and to borrow a line from Berry, because I'm a company man -- let's use the Motley Fool CAPS screener to find the stock market's version of waiver-wire heroes like Bush. Here's what we're looking for:

  • A minimum $250 million market cap, because we don't draft unsigned free agents.
  • A price-to-earnings (P/E) ratio of less than 12, because we're not interested in players that everyone else loves.
  • A 10% or better return on equity (ROE), because we want proof that this stock can play at the level we need it to.
  • A 20% or worse haircut in price over the past year, because we're bargain hunters.

Today's screen returned 183 candidates that could be worthy of filling roster spots in your portfolio. These six possess a track record of superior returns on shareholder equity:

Company

52-Week Price Change

P/E Ratio

ROE

Life Partners Holdings (Nasdaq: LPHI  )

(32.4%)

9.8

60.0%

Eagle Rock Energy Partners (Nasdaq: EROC  )

(69.3%)

2.1

42.7%

Chicago Bridge & Iron (NYSE: CBI  )

(27.6%)

10.1

23.7%

Energizer Holdings (NYSE: ENR  )

(25.4%)

11.2

20.3%

ArcelorMittal (NYSE: MT  )

(35.4%)

6.2

17.0%

Boots & Coots (NYSE: WEL  )

(27.8%)

9.8

12.6%

Source: Motley Fool CAPS screen data.

Of these, I'd pick up Energizer Holdings -- and not just because of the bunny in the hip shades. I want to own a stock that just keeps going, and going, and going, and going. There's reason to believe Energizer can do that for investors. Several reasons, in fact, according to CAPS All-Star BoiseKen:

The fundamentals are working for me along with the positive cash flow. I really like the diversification into other disposable-consumable brands like Playtex. Some people fear that they will fail to keep up with battery trends, but I think the risk-reward scenario from a low P/E stock with 15% or so growth rate combined with other growing product lines makes this a safe bet for new money in this frothy market.

I agree, but I'm also just one Fool. What do you think? Would you give Energizer a spot on your portfolio roster? Let us know by signing up for CAPS today. It's 100% free to participate.

More bargain basement Foolishness:

Marvel Entertainment is a Motley Fool Stock Advisor selection. Chicago Bridge & Iron is a Global Gains pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers has yet to be named a friend of ESPN's Fantasy Focus podcast. One day, perhaps. Tim had stock and options positions in Marvel at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool.

The Fool's disclosure policy is no fantasy. It's 100% natural, fresh-baked disclosure-y goodness.


Read/Post Comments (2) | Recommend This Article (12)

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.

  • Report this Comment On September 18, 2009, at 10:43 PM, HarryCaraysGhost wrote:

    I really could'nt figure out what EROC's plan means.

    I'm offerred the warrants to buy at, was it $3.10 or $3.50?

    What happens to the shares I currently own.

  • Report this Comment On September 22, 2009, at 11:48 PM, robertdoneill wrote:

    if ENR was so great, why have insiders been selling like crazy at these levels?

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