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 160,000-plus 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.
|
Company
|
Book Value Multiple
|
1-Year Stock Performance
|
CAPS Rating
(out of 5)
|
|
Sprint Nextel (NYSE: S )
|
0.6
|
7.0%
|
**
|
|
Bank of America (NYSE: BAC )
|
0.9
|
161.2%
|
***
|
|
NYSE Euronext (NYSE: NYX )
|
1.1
|
72.5%
|
*****
|
|
Yahoo! (Nasdaq: YHOO )
|
1.9
|
29.7%
|
**
|
|
Walt Disney (NYSE: DIS )
|
1.9
|
95.5%
|
****
|
Source: Yahoo! Finance and CAPS as of March 30.
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
As AT&T (NYSE: T ) and Verizon (NYSE: VZ ) slug it out over who has the better map and whether Apple's iPhone could find a home with two different carriers, where is Sprint?
Picking up the pieces is probably the best way to put it. The company has been badly lagging the two wireless leaders and has been steadily losing customers and losing money. Hope springs eternal at Sprint, though, and the optimism hinges on the company's 4G network. The company certainly has its work cut out trying to convince customers that it's worth switching to get that extra "G," and CAPS members don't seem to think the gambit will pan out.
With no long-term debt, more than $3 billion in cash, and positive free cash flow, does Yahoo! need to beat Google to be a good investment? Assuming it at least stays competitive, at the right price the answer is probably "no." However, it would seem the CAPS community doesn't think the current valuation is attractive enough.
It's been a long, hard road for banks like Bank of America, but the rewards have been impressive for investors who still had faith at the bottom. Of course, the question now is whether there is any juice left.
Considering that B of A's stock historically traded around twice book value, today's valuation could imply significant additional upside. However, a lot hangs on just how much garbage is left on the company's balance sheet -- not to mention the balance sheets of Merrill Lynch and Countrywide. At this point, CAPS members are still at odds on whether the risk is worth the reward.
A five-star is born!
Mickey Mouse may well be one of those things that remains pretty constant no matter what other craziness is going on.
For a consumer business like Disney, an economic downturn driven by high unemployment and a big drop in consumer confidence is just the kind of thing that should take the pep out of Mickey's step. To be sure, the company's results have taken a hit over the past year, with revenue down slightly and earnings per share off nearly 23% in 2009.
The folks at Disney continued to push forward, though, making significant strategic moves like acquiring Marvel and paving the way for a Disney theme park in Shanghai. Investors have certainly been excited about the stock over the past year, and CAPS members have given it a pretty strong vote of confidence as well.
But as good as Disney's four-star rating may be, it fell one star short of this week's top spot, which went to exchange operator NYSE Euronext.
Why are CAPS members so excited about NYSE? I think the low valuation and the 4% dividend count for a lot, but let's take a look at what Motley Fool co-founder, CAPS All-Star, and Rule Breakers guru David Gardner (TMFBreakerDave) has to say about it:
The growth in derivatives market has helped, and a lack of IPOs has hurt, but the great freeze on IPOs of the past few years is thawing. This company isn't counted on for much these days (witness the 5% yield), but with a powerful brand, good leadership, and an ability to continue to consolidate world markets through buyouts, I think [NYSE Euronext] beats the market from here.
Make your vote count!
Do you agree that NYSE Euronext 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.
While some of these stocks may have potential. Fool Rex Moore thinks he's found the perfect stock.
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