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 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 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)
|
|
First Marblehead (NYSE: FMD )
|
0.5
|
41.7%
|
****
|
|
Hurco Companies (Nasdaq: HURC )
|
0.9
|
(7.1%)
|
*****
|
|
Toyota Motor (NYSE: TM )
|
1.2
|
18.4%
|
***
|
|
Citigroup (NYSE: C )
|
1.3
|
(64.8%)
|
**
|
|
Goldman Sachs (NYSE: GS )
|
1.7
|
78.7%
|
**
|
Sources: Yahoo! Finance and CAPS as of Oct. 26.
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
Despite a rousing round of earnings from financial companies like Goldman Sachs and JPMorgan Chase (NYSE: JPM ) , CAPS members have left most major financial companies in the doldrums of CAPS ratings. Whether it's Citigroup, which can't seem to get out of its own way, Goldman and its PR problems, or Bank of America (NYSE: BAC ) loping through management changes and a battle with the government over Merrill Lynch, the CAPS community doesn't yet see much of a silver lining.
Jumping from finance to automakers, we find a different set of issues. Thankfully, General Motors and Chrysler aren't representative of the entire industry, but CAPS members have looked at strapped consumers and a stumbling global economy and seen strong enough headwinds to steer themselves away from Toyota.
A five-star is born!
Talk about a fall from grace. Once a high-flying finance company with a stock price in the upper $50s, First Marblehead was caught with its pants down when the financial crisis rolled around. While Marblehead's focus area of student loans hasn't become any less important, the company's business model has exposed it to massive losses -- including a $363 million smudge for fiscal 2009.
With a stock price now under $2 and a total equity value well below its $405 million book value, CAPS members have seen fit to slap a four-star rating on Marblehead's stock. But the love left for fallen angel Marblehead wasn't enough to vault it over this week's top value stock, Hurco.
Hurco manufactures machine tools used by industrial manufacturers all over the globe. Hurco's 41-year history has rarely been a smooth ride. As industrial manufacturing tends to get hit hard during recessions, Hurco has to be prepared to ramp up operations when times are good and cut the fat quickly when the biting winds of downturns freeze out its customers.
Economic conditions recently pushed Hurco's results into the red, but the company has maintained a safe, debt-free balance sheet that should allow it to jump back on the horse as manufacturers begin to break out their checkbooks again.
On CAPS, the stock has garnered nearly 1,700 outperform ratings on its way to a perfect five-star rating. CAPS All-Star cibient recently joined the bullish chorus:
Beaten down in sales, but they have managed to preserve their balance sheet (fairly cash heavy, $4 per share or 25% of share price). I still see Hurco growing faster than their peers going forward, especially once this becomes an earnings machine again based on economies of scale. If you believe the manufacturing sector will return, Hurco should shine. This is in my real portfolio.
Make your vote count!
I've already given Hurco an outperform rating in my CAPS portfolio, but what do you think? Do you agree that Hurco could be America's next top value stock? Click over to the totally free CAPS service 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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