Though value investors have been some of the most successful investors out there, finding good stocks at bargain prices is far from easy. While markets aren't as efficient as some university professors may 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 140,000 members of The Motley Fool's CAPS community voting on which stocks are true stars and which are just posers. To gather 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 from the array of companies that fall into this category, but you can also run the same screen that I did on the CAPS screener.
|
Company
|
Book Value Multiple
|
1-Year Stock Performance
|
CAPS Rating
(out of 5)
|
|
Western Refining (NYSE: WNR)
|
0.7
|
(7.6%)
|
****
|
|
Time Warner (NYSE: TWX)
|
1.0
|
9.8%
|
**
|
|
Toll Brothers (NYSE: TOL)
|
1.2
|
(6.1%)
|
*
|
|
Huntsman Corp. (NYSE: HUN)
|
1.3
|
(16.8%)
|
*****
|
|
Wells Fargo (NYSE: WFC)
|
1.6
|
7.0%
|
***
|
Sources: Yahoo! Finance and CAPS as of Oct. 12.
As you can see, 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
Some folks may be talking about signs of life in the housing market, but CAPS members hardly seem ready to abandon their pessimism on homebuilder stocks. Whether we're talking about Toll Brothers, KB Home, or just about any stock under the "home builder" tag on CAPS, it's a sea of one-star ratings. Given the amount of housing inventory floating around, it's hard to argue with this dour view.
Time Warner has spun off its cable assets and is in the process of unloading the ungainly AOL unit, but it would seem that the specter of the company's empire-building days still hangs over it. Despite being the parent of HBO and Warner Brothers, Time Warner has managed to score only a two-star rating from the CAPS community, as many members have found little that excites them about this media giant.
As for Wells Fargo, a three-star rating isn't all that bad for a financial company -- both Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM) are rated two stars -- but it still keeps this bank's stock out of the upper reaches of the CAPS universe.
A five-star is born!
CAPS members have been able to look past Western Refining's debt load and the debilitating assault on refining margins over the past year and see promise for the future. And I see little reason to argue. After all, gasoline is a product we depend on, and refining margins tend to be highly cyclical. So any company that has refining equipment and is financially sound enough to deal with the downswings could be a good bet at the right price.
But Western Refining's four-star rating wasn't quite good enough to put it at the head of the class this week. Snagging that spot was Huntsman Corp., one of the largest global manufacturers of chemicals for a seemingly endless number of products, from refrigeration to aerospace products to detergent.
As the business folks might say, Huntsman is highly leveraged to the economy, so the company takes it right on the chin during tough economic times. However, this also means that when the economy turns back up, so does Huntsman's bottom line. And with a lot of folks jabbering about economic recovery, it might just be the right time to keep an eye on this chemicals expert.
The CAPS community certainly thinks Huntsman is worth your attention. The five-star stock has snagged 491 outperform ratings against just 22 underperforms. Back in August, CAPS All-Star Lordrobot chimed in:
Vastly underrated. 40% insider owned. Div is for real. Company has the right approach. Marvelous array of industrial chemicals and adhesives. This is real value.
Make your vote count!
I've already given Huntsman an outperform rating in my CAPS portfolio, but what do you think? Do you agree that Huntsman 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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