America's Next Top Value Stock

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 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)
Western Refining (NYSE: WNR  )	0.7	(57.1%)	*****
MetLife (NYSE: MET  )	1.1	57.9%	***
SunPower (Nasdaq: SPWRA  )	1.3	(28.4%)	***
UBS (NYSE: UBS  )	1.5	57.5%	**
General Electric (NYSE: GE  )	1.7	56.2%	****

Source: Yahoo! Finance and CAPS as of April 13.

As you can see, though these stocks all carry value-like multiples, the CAPS community obviously doesn't think that all are worthy of your investment dollars.

No twinkle in these stars
Though the U.S. was the epicenter of the recent financial meltdown, the crisis ended up a very global one. In 2008, Germany's Deutsche Bank lost more than $5 billion, the Netherlands' ING Group took a hit of almost $5 billion, and Royal Bank of Scotland lost an amazing $35 billion. For those keeping track at home, RBS' loss was even larger than Citigroup's $28 billion splash of red ink.

Switzerland-based UBS' performance falls toward the worse end of the spectrum, with a $20 billion 2008 loss and another $7 billion in losses racked up in total between 2007 and 2009. In December, the company reported its first profit since September 2008, which hopefully means that it's at least no longer knocking at death's door.

But it may take some time for the bank to rebuild its reputation in the eyes of investors and customers. Tens of billions in losses are bad enough, but the bank also paid a $780 million fine for its role in helping wealthy Americans dodge taxes. It's going to take more than a spit-shine to polish out those dings.

Both SunPower and MetLife claim an extra star than UBS, but with just three stars each, CAPS members haven't exactly been excited about either stock.

For MetLife, the big overhang is the company's $15.5 billion deal to buy AIG's (NYSE: AIG  ) Alico unit. Alico is AIG's second-largest foreign life insurance business and, according to The Wall Street Journal, it will make the formerly U.S.-focused MetLife instantly competitive with major global players like Allianz and Prudential. But with a massive acquisition like that comes a lot of risk, particularly as MetLife comes off a year in which it lost $2.2 billion.

As to SunPower's less-than-inspiring rating, a lot could be chalked up to the solar industry itself. For a while, many investors saw it as the hottest thing since Webvan, but the sheen has come off as energy prices have dropped and an absolute tsunami of competitors have flooded into the market. For SunPower, though, the issue may only be partially industry-driven, as my fellow Fool Toby Shute pointed out last month.

A five-star is born!
GE's struggles during the financial crisis have likely been jaw-dropping for many longtime shareholders. The company has long been considered a blue chip among blue chips, and yet struggles in its financial division led to not only severe profit declines, but a huge dividend cut.

There was nothing illusory about the problems that GE faced. Like the rest of the financial industry, it saw truckloads of bad loans come home to roost. However, it's notable that even during a rocky 2009, GE finished the year with an $11 billion profit. Meanwhile, GE has sold a majority stake in its NBC unit to Comcast (NYSE: CMCSA  ) and is shrinking its finance unit. Both moves are meant to make the company safer and more focused.

But while CAPS members have given GE a four-star rating, that wasn't quite enough to put it ahead of this week's top value stock, Western Refining.

Western Refining's story is all about big risk and potential for big reward. Right now the company looks downright abysmal from a financial perspective. For full-year 2009, the company's $62 million in operating profit wasn't nearly enough to cover its $137 million in interest expense. Pile on top of that $300 million in goodwill writedowns and you've got a hefty loss on your hands. The balance sheet is no more promising, with well over $1 billion in debt against $689 million in shareholder equity and a measly $75 million in cash.

However, as you can see in the table above, the stock is currently trading well below its book value. That compares to an average price-to-book value of more than four for 2006 and 2007. So the potential for big gains is there if the refining industry sees a turnaround before Western Refining is squished under the weight of its debt.

Could that recovery be imminent? My fellow Fool Mike Pienciak has seen some data that show at least some light at the end of the tunnel.

Make your vote count!
Do you agree that Western Refining 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 other stocks that you think should be in the running.

GE used to be considered one of the top dividend stocks. We can weep about how that is no more, or we can try and track down today's best dividend stocks.